1989 — Page 42

NOTES ON THE ACCOUNTS

I ACCOUNTING POLICIES

a Translation of foreign currencies

Foreign currency loans for purchases of buses and equipment are stated at the contracted rates of exchange. With this exception, foreign currency balances at the year end are translated into Hong Kong dollars at approximately the rates of exchange ruling at the balance sheet date and foreign currency transactions during the year are translated into Hong Kong dollars at the rates ruling at the transaction dates. Differences on foreign currency translation are taken to the profit and loss account.

b Spare parts and stores

Spare parts and stores are valued at cost less provision.

Cost includes cost of purchases of materials, direct labour and an appropriate proportion of overheads.

c Depreciation

Depreciation is provided at rates calculated to write off the cost or valuation of fixed assets over their estimated useful lives. With effect from 1st January, 1989, the annual rates of depreciation of certain fixed assets have been revised in accordance with the amendment to the franchise agreement with the Government as follows:

Buildings

Converted or secondhand buses

Computer equipment

Light duty coaches and other motor vehicles

Plant and machinery, lifts, fixtures and equipment

25 years or over the term of the

lease including extension or renewal period whichever is less 20% p.a. on cost

20% p.a. on cost

16-2/3% p.a. on cost

14-2/7% p.a. on cost

These changes have resulted in additional depreciation charge of HK$3,478,000 for the year.

The rates of depreciation for the following fixed assets remain unchanged:

Land held on long leases with unexpired

term in excess of 50 years

New buses

Tools

d Leased assets

Nil

10% p.a. on cost

50% p.a. on reducing balance

Payments under operating leases are charged to the profit and loss account on a straight line basis over the periods of the respective leases.

e 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.

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