MKH Annual Report 2020

126 FINANCIAL STATEMENTS ANNUAL REPORT 2020 3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (j) Property, plant and equipment (Cont’d) (iii) Depreciation (Cont’d) Immature plantations are stated at cost. The costs of immature plantations consist mainly of the accumulated cost of planting, fertilising and maintaining the plantation, including borrowing costs on such borrowings and other indirect overhead costs up to the time the trees are harvestable and to the extent appropriate. An oil palm plantation is considered mature when such plantation starts to produce at the end of the fourth year. Bearer plants are derecognised upon disposal or when no future economic benefits are expected from its use. Any gains or losses on disposal of bearer plants are recognised in profit or loss in the year of disposal. The residual values and useful lives of bearer plants are reviewed, and adjusted as appropriate, at the end of each reporting period. (k) Property, plant and equipment under hire-purchase arrangement Property, plant and equipment acquired under hire-purchase arrangement are capitalised in the financial statements and the corresponding obligations treated as liabilities. Finance charges are allocated to profit or loss to give a constant periodic rate of interest on the remaining hire-purchase obligations. (l) Prepaid lease payments The upfront payments for right-to-use the leasehold land over a predetermined period are accounted for as prepaid lease payments that are stated at cost less accumulated amortisation, are amortised over the lease term on a straight-line basis, except for leasehold land classified as investment property. (m) Intangible assets (i) Goodwill Goodwill arises on the acquisition of subsidiaries is identified as any excess of the consideration paid over the Group’s share of fair value of the identifiable assets, liabilities and contingent liabilities acquired as at the date of acquisition. Goodwill is initially measured at cost less any accumulated impairment losses. Goodwill is not amortised but instead, it is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Goodwill acquired is allocated to the cash-generating units (“CGU”) expected to benefit from the acquisition synergies. An impairment loss is recognised in profit or loss when the carrying amount of the CGU, including the goodwill, exceeds the recoverable amount of the CGU. The recoverable amount is the higher of the CGU’s fair value less costs to sell and its value in use. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.