In adopting 50 years (including the renewal period) as the criteria for the application of their Statement, the Hongkong Society of Accountants was obviously placing considerable weight and significance on the reference in the Companies Ordinance, Chapter 32, to the same
period.
There is certainly no apparent objectivity in the determination of this
number.
Further, the inclusion of the renewable period hardly seems in line with the Society endorsed ' prudence concept (Statement 105 ).
The renewal period must be regarded as uncertain and unquantifiable as the premium on renewals, and one would think that the premium also was depreciable.
Statement 123, therefore, could be considered, among other things, not to be well supported by the facts, and to be very subjective.
Accountants in Hongkong lobbied by TARGET in regard to opinions on Statement 123, all, with one exception, said that land and buildings in the New Territories, for accounting purposes, should be dealt with as freehold land is dealt with in other countries.
A number of accountants further suggested that more consideration should be given this matter in the year 1985 when an in-depth study should be made of the situation.
Why this date, TARGET has no idea (accountants always seem to possess mystical powers with numerics ), but the point is very clear: There must come a time when this matter of the Lease must be cleared up:
Statement 123 and its attempt at being definitive in regard to Depreciation Accounting is linked with Statement 106 insofar as auditors, when reporting to shareholders of a company, must attest as to the truthfulness and fairness of the accounts as they are presented to the
shareholders.
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