TAN CHONG MOTOR HOLDINGS BERHAD
Annual Report 2014
61
NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
(d) Property, plant and equipment (continued)
(i)
Recognition and measurement (continued)
Cost includes expenditures that are directly attributable to the acquisition of the asset and any other
costs directly attributable to bringing the asset to working condition for its intended use, and the costs
of dismantling and removing the items and restoring the site on which they are located. The cost of self-
constructed assets also includes the cost of materials and direct labour. For qualifying assets, borrowing
costs are capitalised in accordance with the accounting policy on borrowing costs. Cost also may include
transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of
property, plant and equipment.
Purchased software that is integral to the functionality of the related equipment is capitalised as part of that
equipment.
When 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 and loss on disposal of an item of property, plant and equipment is determined by comparing the
proceeds from disposal with the carrying amount of property, plant and equipment and is recognised net
within “other income” and “other expenses” respectively in profit or loss.
Property, plant and equipment under the revaluation model
Surpluses arising from revaluation are dealt with in the revaluation reserve account. Any deficit arising is
offset against the revaluation reserve to the extent of a previous increase for the same property. In all other
cases, a decrease in carrying amount is recognised in profit or loss. When revalued assets are sold, the
amounts included in the revaluation surplus reserve are transferred to retained earnings.
(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 the future economic benefits embodied within the component will
flow to the Group or the Company, and its cost can be measured reliably. The carrying amount of the
replaced component is derecognised to profit or loss. 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,
then that component is depreciated separately.
Depreciation is recognised 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 from the date that they are available for use except
for one of the subsidiaries where its plant, machinery and equipment are depreciated over the shorter of
the model useful life or projected production volume. 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. Freehold land is not depreciated. Buildings are depreciated on a straight-line basis
over the shorter of 50 years or the lease period. Property, plant and equipment under construction are not
depreciated until the assets are ready for their intended use.
