MKH Annual Report 2020

125 MKH BERHAD 3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (j) Property, plant and equipment (Cont’d) (ii) Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of an item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The cost of the day-to-day servicing of the property, plant and equipment are recognised in profit or loss as incurred. (iii) Depreciation Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Freehold land is not depreciated. Property, plant and equipment under construction are not depreciated until these assets are ready for their intended use. The principal annual rates for the current and comparative financial years are as follows: Long-term leasehold land Over lease period of 78 to 99 years Buildings 2% to 12.5% Motor vehicles, plant and machinery 5% to 20% Furniture, fittings and equipment 10% to 25% Plantation infrastructure 12.5% Bearer plants 20 years, or over the lease period if shorter The depreciable amount is determined after deducting the residual value. Depreciation methods, useful lives and residual values are reassessed at the reporting date. Fully depreciated property, plant and equipment are retained in the financial statements until they are no longer in use and no further charge for depreciation is made in respect of these property, plant and equipment. Bearer plants are living plants that are used in the production or supply of agricultural produce, which are expected to bear produce for more than one period and has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales. Bearer plants (oil palm trees) include mature plantations and immature plantations that are established or acquired by the Group. Mature plantations are stated at cost, less accumulated depreciation and any impairment losses where the recoverable amount of the asset is estimated to be lower than its carrying amount. Depreciation is charged so as to write off the cost of mature plantations, using the straight-line method, over the estimated useful lives of 20 years or over the lease period, whichever is shorter. Notes to the Financial Statements FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020