Page 120 - S P Setia Annual Report 2016
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118   S P Setia Berhad Group
                Annual Report 2016

          Notes To The Financial Statements

          For The Financial Year Ended 31 December 2016

              (h)   Investment properties (cont’d.)

                   (ii)  Depreciation

                       Freehold land and investment properties under construction are not depreciated.

                       Depreciation is calculated to write off the depreciable amount of other investment properties on a straight-line basis over
                       their estimated useful lives. Depreciable amount is determined after deducting the residual value from the cost of the
                       investment property.

                       The principal annual rates used for this purpose are:

                        Freehold buildings                                          2% to 10%
                        Leasehold land                                    Lease term of 99 years

                       The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.

              (i)   Build-Operate-Transfer (“BOT”) agreement
                   The Group recognises revenue from the construction and upgrading of infrastructure projects under BOT agreement in
                   accordance with the accounting policy for construction contracts set out in Note 1(m) below. Where the Group performs more
                   than one service under the arrangement, consideration received or receivable is allocated to the components by reference to the
                   relative fair values of the services delivered, when the amounts are separately identifiable.
                   The Group recognises the consideration received or receivable as a financial asset to the extent that it has an unconditional right
                   to receive cash or another financial asset for the construction services. Financial assets are accounted for in accordance with the
                   accounting policy set out in Note 1(o) below.

                   When the consideration receivable does not represent an unconditional right to receive cash or another financial asset, the
                   Group recognises the consideration receivable as either development rights or as intangible assets, based on the allocation of
                   the fair value of the construction services rendered. The accounting policies for the development rights and intangible assets are
                   disclosed in Notes 1(l)(iii) and 1(j) respectively.

                   Subsequent costs and expenditures related to infrastructure and equipment arising from the Group’s commitments to the BOT
                   agreement or that increase future revenue are recognised as additions to the intangible asset and are stated at cost. Capital
                   expenditures necessary to support the Group’s operation as a whole are recognised as property, plant and equipment, and
                   accounted for in accordance with the policy stated under property, plant and equipment in Note 1(g) above. When the Group has
                   contractual obligations that it must fulfil as a condition of its license to:

                   -   maintain the infrastructure to a specified standard; or
                   -   restore the infrastructure when the infrastructure has deteriorated below a specified condition

                   It recognises and measures these contractual obligations in accordance with the accounting policy for provisions in Note 1(w) below.
                   Repairs and maintenance and other expenses that are routine in nature are expensed and recognised in profit or loss as incurred.

              (j)   Intangible assets

                   Intangible assets are recognised to the extent that the Group has acquired a right (a licence) to charge users of public services.

                   Intangible assets are stated at cost less accumulated amortisation and impairment losses. The policy for the recognition and
                   measurement of impairment losses is in accordance with Note 1(p)(iii) below.

                   Amortisation of the intangible assets begins when it is available for use, which means when it is in the location and condition
                   necessary for it to be capable of operating in the manner intended by management.

                   Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceed
                   and the carrying amount of the asset and is recognised in profit or loss when the asset is derecognised.
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