1996 — Page 121

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SIGNIFICANT ACCOUNTING POLICIES (continued)

(f)

Translation of foreign currencies

Foreign currency loans for purchases of buses and equipment which are hedged by forward foreign exchange contracts taken out with the lender are stated at the appropriate contracted rates of exchange. With this exception, foreign currency balances at the year end are translated into Hong Kong dollars at 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 of exchange ruling at the transaction dates. Differences on foreign currency translation are taken to the profit and loss account.

(g) 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.

(h) Amortisation and depreciation

Amortisation and depreciation is provided at rates calculated to write off the cost or valuation of fixed assets over their estimated useful lives as follows:

Leasehold land

Buildings

New buses

Light duty coaches and other motor vehicles

Plant and machinery, lifts, fixtures and equipment

Tools

Computer equipment

(i)

Leased assets

Over the terms of the leases

50 years or over the term of the lease

including extension or renewal period whichever is less

7 1/7% p.a. on cost

16 2/3% p.a. on cost

14 2/7% p.a. on cost

50% p.a. on reducing balance

20% p.a. on cost

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

(j) Deferred taxation

Deferred taxation is provided using 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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