MISC BERHAD - Annual Report 2014 p 170 2. Significant accounting policies (cont’d.) 2.3 Summary of significant accounting policies (cont’d.) (e) Ships, offshore floating assets, other property, plant and equipment, and depreciation (cont’d.) Freehold land has an unlimited useful life and therefore is not depreciated. Ships and offshore floating assets under construction and projects in progress are also not depreciated as these assets are not available for use. Depreciation of ships and offshore floating assets commences from the date of delivery of both assets. Depreciation of ships and offshore floating assets in operation and other property, plant and equipment is provided for on a straight-line basis to write off the cost of each asset to its residual value over the estimated useful life at the following annual rates: Ships 2.5% - 4.0% Offshore floating assets 5.0% - 20.0% Buildings 2.0% - 7.0% Drydocks and waste plant 2.0% - 10.0% Motor vehicles 10.0% - 33.3% Furniture, fittings and equipment 10.0% - 33.3% Computer software and hardware 15.0% - 33.3% Plant and machinery 10.0% - 20.0% Tugboats, engines and pushers 6.7% - 20.0% The depreciation policy for drydocking cost included in ships is stated in Note 2.3(x). The residual values, useful lives and depreciation method are reviewed at each financial period end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the ships, offshore floating assets, and other property, plant and equipment. Ships, offshore floating assets and other property, plant and equipment are derecognised upon disposal, or when no future economic benefits are expected from their use or disposal. The difference between the net disposal proceeds, if any, and the net carrying amount is recognised in the income statement and the unutilised portion of the revaluation surplus is taken directly to retained profits. (f) Construction contracts Where the outcome of a construction contract can be reliably estimated, contract revenue and contract costs are recognised as revenue and expenses respectively by using the stage of completion method. The stage of completion is measured by reference to the proportion of physical completion or based on technical milestones defined under the contracts, and taking into account the nature and its associated risk. Where the outcome of a construction contract cannot be reliably estimated, contract revenue is recognised to the extent of contract costs incurred that is probable to be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. NOTESTOTHE FINANCIAL STATEMENTS - 31 December 2014
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