FGV Annual Report 2012

28 Felda Global Ventures Holdings Berhad 3 SIGNIFICANT ACCOUNTING POLICIES (continued) (h) Financial liabilities Financial liabilities are recognised on the statement of financial position when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. Financial liabilities are recognised initially at fair value, plus, in the case of financial liabilities other than derivatives, directly attributable transactions costs. Subsequent to initial recognition, all financial liabilities are measured at amortised cost using the effective interest method except for the LLA liability and derivatives in a loss position which are measured at fair value through profit and loss. For financial liabilities other than the LLA liability and derivatives, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. Gains or losses arising from changes in fair value of the LLA liability and derivatives are recognised in profit or loss within gains/losses, net. Net gains or losses on derivatives include exchange differences. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the statement of financial position date. Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially difference terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss. (i) Property, plant and equipment Property, plant and equipment are initially stated at cost. Subsequently, all property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The cost of an item of property, plant and equipment initially recognised includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Cost also includes borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that the future economic benefits associated with the item will flow to the Group and the costs of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. Freehold land is not depreciated as it has an infinite life. All property, plant and equipment are depreciated on a straight line basis to write off the cost of each asset to their residual values over their estimated useful lives as follows: Property, plant and equipment Estimated useful lives (years) Buildings, structures and renovations 3 to 50 Plant and machinery 8 to 31 Motor vehicles 3 to 10 Office equipment, tools and other equipment 2 to 15 The assets’residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date. Depreciation on property, plant and equipment ceases at the earlier of derecognition and classification as held for sale. Depreciation on assets under construction commences when the assets are ready for their intended use. At each statement of financial position date, the Group assess whether there is any indication of impairment. If such an indication exists, an asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. See significant accounting policies Note 3(n) on impairment of non-financial assets. Gains and losses on disposals are determined by comparing proceeds with the carrying amount of the assets and are included in profit or loss. Notes to the Financial Statements for the financial year ended 31 December 2012