1999 — Page 37

Notes on the Accounts

Hong Kong Ferry (Holdings) Co. Ltd.

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1. PRINCIPAL ACCOUNTING POLICIES

(i) Fixed assets and depreciation

(i) Fixed assets other than investment properties, properties held for development and hotel

properties are stated in the balance sheet at cost less accumulated depreciation.

(ii) The carrying amount of fixed assets carried at depreciated cost is reviewed periodically

to determine whether they are in excess of their recoverable amounts. If the carrying

amount exceeds the recoverable amount, the asset is written down to the recoverable

amount. In assessing the recoverable amount, the expected cash flows generated by

the fixed assets are not discounted to their present value.

(iii) Depreciation is provided at rates calculated to write off the cost of fixed assets, other than investment properties, properties held for development and hotel properties, over their estimated useful lives on a straight line basis as follows:

Land

Buildings

Ferry vessels and other crafts

Machinery, furniture and other fixed assets

- Dry dock

- Others

Over the unexpired terms of the leases

40 years or over the unexpired terms of the

leases, if shorter

8 to 15 years

40 years

4 to 10 years

(k) Inventories

Inventories principally include trading stocks, and spare parts and consumables.

(i) Trading stocks are stated at the lower of cost and net realisable value. Cost includes the cost of materials computed using the weighted average method. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

(ii) Spare parts and consumables are stated at cost, computed using the weighted average

method, less provision for obsolescence.