Annual Report 2011 - Mandarin Oriental Hotel Group
Annual Report 2011 - Mandarin Oriental Hotel Group
Annual Report 2011 - Mandarin Oriental Hotel Group
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<strong>Annual</strong> <strong>Report</strong> <strong>2011</strong> 37<br />
F Tangible fixed assets and depreciation<br />
Freehold land and buildings, and the building component of owner-occupied leasehold properties are stated at cost less<br />
any accumulated depreciation and impairment. Long-term interests in leasehold land are classified as finance leases<br />
and grouped under tangible assets if substantially all risks and rewards relating to the land have been transferred to the<br />
<strong>Group</strong>, and are amortized over the useful life of the lease. Grants related to tangible assets are deducted in arriving at<br />
the carrying amount of the assets. Other tangible fixed assets are stated at cost less amounts provided for depreciation.<br />
Depreciation of tangible fixed assets is calculated on the straight line basis to allocate the cost or valuation of each asset<br />
to its residual value over its estimated useful life. The residual values and useful lives are reviewed at each balance sheet<br />
date. The estimated useful lives are as follows:<br />
Freehold and long leasehold buildings 21 years to 150 years<br />
Properties on leases with less than 20 years over unexpired period of lease<br />
Surfaces, finishes and services of hotel properties 20 years to 30 years<br />
Leasehold improvements 10 years<br />
Leasehold land over the respective lease term<br />
Plant and machinery 5 years to 15 years<br />
Furniture, equipment and motor vehicles 3 years to 10 years<br />
No depreciation is provided on freehold land as it is deemed to have an indefinite life.<br />
Where the carrying amount of a tangible fixed asset is greater than its estimated recoverable amount, it is written down<br />
immediately to its recoverable amount.<br />
The profit or loss on disposal of tangible fixed assets is recognized by reference to their carrying amount.<br />
G Loans receivable<br />
Loans receivable are non-derivative financial assets with fixed or determinable payments that are not quoted in an<br />
active market. They are classified under non-current assets unless their maturities are within twelve months after<br />
the balance sheet date. Loans receivable are carried at amortized cost using the effective interest method.<br />
H Other investments<br />
Other investments are non-financial assets and are stated at cost less provision for impairment.<br />
I Leases<br />
Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards of<br />
ownership to the lessee. All other leases are classified as operating leases.<br />
Payments made under operating leases (net of any incentives received from the lessor) are charged to profit and loss<br />
on a straight line basis over the period of the lease. When a lease is terminated before the lease period has expired,<br />
any payment required to be made to the lessor by way of penalty is recognized as an expense in the year in which<br />
termination takes place.