Notes on the Accounts
(Expressed in HK$'000)
1.
Accounting Policies
(a) Basis of consolidation
The consolidated accounts include the accounts of the Company and all its subsidiaries made up to 31st December each year together with the Group's share of the results for the year and post acquisition retained profits or losses of its associates.
Capital reserve arising on consolidation represents the excess of net tangible assets of the companies acquired as at the date of acquisition over the value of the consideration paid. Unrealised inter-company profits arising on sale of fixed assets, constructed by a subsidiary company, to the Group are credited to capital reserve.
All other significant inter-company items and transactions have been eliminated on consolidation.
(b) Associates
An associate is defined as an investment where the Group holds for long term purposes between 20% and 50% of the issued share capital and exercises significant influence over that company's management. Interests in associates are stated at cost, less provision where appropriate. The results of associates are incorporated in the accounts to the extent of the Group's share of the post acquisition profits less losses calculated from the accounts made up to 31st December each year.
(c) Depreciation
(i)
Depreciation is provided at rates calculated to write off the cost of fixed assets over their estimated useful lives on a straight line basis per annum as follows:--
Land held on long leases
Land held on medium term leases
Buildings
Vessels - steel hull
fibreglass hull
Reconditioned vessels
Nil
Over the unexpired terms of the
leases
2.5%
3.33%
5%
5% - 12.5%
Motor vehicles
Machinery, furniture and other fixed assets
25% 10%
(ii) Under the terms of the 1984 Sino-British Joint Declaration, lessees holding land leases in the New Territories shall be granted the right to extend their leases to 30th June 2047. On the basis of the Company's intention to exercise its right to extend such leases held by the Company to 30th June 2047, these are now regarded as long term with effect from 1st January 1984. Accordingly, there will be no further amortisation of these land leases until 1997, when the balance will be amortised over the remaining period of the extended lease.
(d) Stocks and work in progress
Stocks and work in progress are valued at the lower of cost and net realisable value. In respect of work in progress, cost includes cost of purchase of materials, direct labour and expenses and an appropriate proportion of production overheads, less any foreseeable losses and progress payments receivable to date. No profit is taken until the work is fully completed.
(e) Assets under construction
(i) Vessels
Construction cost is transferred to fixed assets on granting of the marine licence. (ii) Property
Land cost relating to property which is being developed for investment purposes is included in fixed assets under leasehold land.
Property development expenditure, inclusive of interest, is included as cost of development up to the date when the occupation permit is granted..