Notes on The Accounts
(Expressed in Hong Kong dollars)
1. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of consolidation
The consolidated accounts include the accounts of China Motor Bus Company, Limited and its subsidiary made up to 30th June each year.
(b) Associated company
In the consolidated balance sheet, investment in associated company is stated at cost less provision where the directors consider there has been a permanent diminution in its underlying value. The group's share of the results of its associated company for the year is not equity accounted for as it is not material to the consolidated profit.
(c) Depreciation
Depreciation of the company's fixed assets is calculated in accordance with the company's franchise, as follows:-
Leasehold land
no depreciation
Buildings
Motor buses
Plant, fixtures and equipment
over the period of the lease plus any renewal period
on a straight line basis, over 12 years for new buses and 7 years for converted or second hand buses, to a residual value of $10,000 for each double deck and $7,000 for each single deck bus
on a straight line basis to write off the assets over 10 years
No depreciation was provided for in respect of the subsidiary's leasehold land and buildings as they were disposed of during the year.
(d) Translation of foreign currencies
Foreign currency transactions during the year are translated into Hong Kong dollars at the exchange rates ruling at the transaction dates. Monetary assets and liabilities in foreign currencies are translated into Hong Kong dollars at the market rates of exchange ruling at the balance sheet date. Exchange gains and losses on foreign currency translation are dealt with in the profit and loss account.
(e) Employees' retirement schemes
Provision is made annually by the company to provide for the contingent liability in respect of the employees' retirement benefits payable to employees of the company.
(f) Stores and spare parts
Stores and spare parts are stated at cost less provision where appropriate.
(g) Contingency reserves
insurance
The company sets aside annually an amount to meet possible liabilities arising from third party claims in connection with the operation of franchised motor buses.
The company also sets aside an amount to meet potential future losses which may arise as a result of fire damage to the fleet.
(h) Operating leases
Payments under operating leases are charged to the profit and loss account on a straight line basis over the periods of the respective leases.
(i) Deferred taxation
Deferred taxation is calculated under the liability method in respect of the taxation effect arising from all timing differences which are expected with reasonable probability to crystallise in the foreseeable future.
(i) Deferred profits
Profits from the sale of land and buildings to an associated company for development for resale and investment purposes are deferred to the extent of the group's attributable interest in the associated company. The deferred profits will be recognised and taken to profit and loss account as and when the properties are sold by the associated company to third parties.
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