Annual Report 2019

132 CHINA MERCHANTS PORT HOLDINGS COMPANY LIMITED Notes to the Consolidated Financial Statements For the year ended 31 December 2019 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.5 Property, plant and equipment (continued) Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the consolidated statement of profit or loss during the period in which they are incurred. Buildings in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. Costs include any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. When the Group makes payments for ownership interests of properties which includes both leasehold land and building elements, the entire consideration is allocated between the leasehold land and the building elements in proportion to the relative fair values at initial recognition. To the extent the allocation of the relevant payments can be made reliably, interest in leasehold land that is accounted for as an operating lease is presented as “right-of-use assets” (upon application of HKFRS 16) or “land use rights” (before application of HKFRS 16) in the consolidated statement of financial position except for those that are classified and accounted for as investment properties under the fair value model. When the consideration cannot be allocated reliably between non-lease building element and undivided interest in the underlying leasehold land, the entire properties are classified as property, plant and equipment. Leasehold land classified as finance lease under HKAS 17 (prior to 1 January 2019) commences amortisation from the time when the land interest becomes available for its intended use. Amortisation on leasehold land classified as finance lease and depreciation of other assets is calculated using the straight-line method to allocate cost to their residual values over their estimated useful lives, as follows: Leasehold land classified as finance lease Shorter of remaining lease term of 50 years or useful life Buildings Shorter of the lease term or 50 years Harbour works, buildings and dockyard 8 to 40 years Plant and machinery 3 to 20 years Furniture and equipment 3 to 20 years Vessels and ships 15 to 25 years Motor vehicles 5 to 10 years Leasehold improvements Shorter of the lease term or 5 to 20 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of the reporting period. No depreciation is provided on assets under construction. All direct costs relating to the construction of property, plant and equipment including interests and finance costs and foreign exchange differences of the related borrowed funds up to the extent that they are regarded as an adjustment to interest costs during the construction period are capitalised as the cost of the property, plant and equipment.