6 Property, Plant and Equipment

Accounting policy

Please refer to Note 5 for the accounting policy on impairment

1. Vessels and vessel component costs
   
   Vessels are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of an asset comprises its purchase price and any directly attributable cost of bringing the asset to its working condition for its intended use. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of vessels.
   Vessel component costs include the cost of major components which are usually replaced or renewed at drydockings. The assets are stated at cost less accumulated depreciation and accumulated impairment losses. The Group subsequently capitalises drydocking costs as they are incurred.



2. Vessels under construction
   
   Vessels under construction are stated at cost and are not subject to depreciation. All cost of services relating to the construction of vessels, including borrowing costs (see below) during the construction period, are capitalised as cost of vessels. When the assets concerned are brought into use, the costs are transferred to vessels and vessel component costs and depreciated in accordance with the policy on depreciation.



3. Borrowing costs
   
   Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use. Other borrowing costs are expensed.



4. Other property, plant and equipment
   
   Other property, plant and equipment, comprising buildings, leasehold improvements, furniture, fixtures and equipment and motor vehicles, are stated at cost less accumulated depreciation and accumulated impairment losses.



5. Subsequent expenditure
   
   Subsequent expenditure is either included in the carrying amount of the assets or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the expenditure will accrue to the Group and such expenditure can be measured reliably. The carrying amount of a replaced part is written off. All other repairs and maintenance are expensed in the income statement during the financial period in which they are incurred.



6. Depreciation
   
   Depreciation of property, plant and equipment is calculated using straight-line method to allocate their cost to their residual values over their remaining estimated useful lives.



7. Residual values and useful lives
   
   The residual values of the Group’s assets are defined as the estimated amounts that the Group would obtain from disposal of the assets, after deducting the estimated costs of disposals, as if the assets were already of the age and in the conditions expected at the end of their useful lives.
   
   Useful lives of the Group’s vessels and vessel component costs are defined as the period over which they are expected to be available for use by the Group.
   
   The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.



8. Gains or losses on disposal
   
   Gains or losses on disposal are determined by comparing the proceeds with the carrying amounts and are recognised in the income statement.