Mandarin Oriental International Limited - Mandarin Oriental Hotel ...

F Tangible fixed assets and depreciation
Freehold land and buildings, and the building component of owner-occupied leasehold properties are stated
at valuation. Independent valuations are performed every three years on an open market basis and, in the case
of the building component of leasehold properties, on the basis of depreciated replacement cost. Depreciated
replacement cost is used as the most reliable basis of allocating open market value to the building component.
In the intervening years, the Directors review the carrying values and adjustment is made where there has been
a material change. Revaluation surpluses and deficits are dealt with in property revaluation reserves except for
movements on individual properties below depreciated cost which are dealt with in the consolidated profit and
loss account. Grants related to tangible fixed assets are deducted in arriving at the carrying amount of the assets.
Other tangible fixed assets are stated at cost less amounts provided for depreciation.
Depreciation of tangible fixed assets is calculated on the straight line basis to allocate the cost or valuation of each
asset to its residual value over its estimated useful life. The residual values and useful lives are reviewed at each
balance sheet date. The estimated useful lives are as follows:
Freehold and long leasehold buildings 21 years to 150 years
Properties on leases with less than 20 years over unexpired period of lease
Surface, finishes and services 20 years to 30 years
Leasehold improvements 10%
Plant and machinery 6.7% – 10%
Furniture and equipment 10 – 33.3%
No depreciation is provided on freehold land as it is deemed to have an indefinite life.
Where the carrying amount of a tangible fixed asset is greater than its estimated recoverable amount, it is written
down immediately to its recoverable amount.
The profit or loss on disposal of tangible fixed assets is recognized by reference to their carrying amount.
The cost of maintenance and repairs of the buildings is charged to the consolidated profit and loss account
as incurred.
G Leases
Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
Payments made under operating leases (net of any incentives received from the lessor) are charged to the
consolidated profit and loss account on a straight line basis over the period of the lease. When a lease is terminated
before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognized
as an expense in the year in which termination takes place.
H Loans receivable
Loans receivable are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They are classified under non-current assets unless their maturities are within twelve months after
the balance sheet date. Loans receivable are carried at amortized cost using the effective interest method.
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