NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2022 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2022 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 3.3 Property, plant and equipment (cont’d) (iii) Depreciation (cont’d) The estimated useful lives for the current and comparative years are as follows: Freehold buildings and leasehold land and buildings · Core component of hotel buildings – 50 years, or lease term if shorter · Surface, finishes and services of hotel buildings – 30 years, or lease term if shorter · Leasehold land – Lease term Furniture, fittings, plant and equipment and improvements – 3 to 20 years Residual values ascribed to the core component of hotel buildings depend on the nature, location and tenure of each hotel property. No residual values are ascribed to surface, finishes and services of hotel buildings and rightof-use assets in respect of leases where the Group is a lessee. Depreciation methods, useful lives and residual values are reviewed, and adjusted as appropriate, at each reporting date. 3.4 Investment properties (i) Recognition and measurement Investment properties are properties held either to earn rental income or capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services, or for administrative purposes. Investment properties are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the investment properties. Costs of self-constructed investment properties include costs of materials and direct labour, any other costs directly attributable to bringing the investment properties to a working condition for their intended use and capitalised borrowing costs. Gains and losses on disposal of investment properties (calculated as the difference between the net proceeds from disposal and the carrying amounts of the investment properties) are recognised in profit or loss. (ii) Depreciation Depreciation is recognised as an expense in profit or loss on a straight-line basis over the estimated useful lives of each component of an investment property. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. No depreciation is provided on freehold land (including 999-year leasehold land) included in the investment properties. The estimated useful lives for the current and comparative years are as follows: Freehold and leasehold properties – 50 years, or lease term if shorter Leasehold land – Lease term ranging from 50 to 96 years Furniture, fittings, plant and equipment and improvements – 3 to 20 years Depreciation methods and useful lives are reviewed, and adjusted as appropriate, at each reporting date. 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 3.3 Property, plant and equipment (i) Recognition and measurement Items of property, plant and equipment are stated at cost, which includes capitalised borrowing costs, less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes: • the cost of materials and direct labour; • any other costs directly attributable to bringing the assets to a working condition for their intended use; • when the Group has an obligation to remove the asset or restore the site, an estimate of the costs of dismantling and removing the items and restoring the site on which they are located; and • capitalised borrowing costs. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. If significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. The gain or loss on disposal of an item of property, plant and equipment is recognised net in profit or loss. (ii) Subsequent costs The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that future economic benefits embodied within the component will flow to the Group, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. (iii) Depreciation Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately. Depreciation is recognised as an expense in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Depreciation is recognised from the date that the property, plant and equipment are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use. No depreciation is provided on freehold land (including 999-year leasehold land). For freehold and leasehold properties under development and renovation-in-progress, no depreciation is provided until these items have been completed. CITY DEVELOPMENTS LIMITED ANNUAL REPORT 2022 FINANCIALS 132 133
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