Annual Report 2019

119 Miramar Hotel and Investment Company, Limited Annual Report 2019 Notes to the Financial Statements 1 Significant accounting policies (Continued) (i) Other property, plant and equipment (continued) Depreciation is calculated to write off the cost of items of property, plant and equipment, less their estimated residual value, if any, using the straight line method over their estimated useful lives as follows: – leasehold land and right-of-use assets are depreciated over the remaining term of the lease; – freehold land is not depreciated; – buildings including hotel property situated on leasehold land are depreciated over the unexpired term of the lease; and – machinery, furniture, fixtures and equipment 4–14 years Both the useful life of an asset and its residual value, if any, are reviewed annually. (j) Leased assets At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control is conveyed where the customer has both the right to direct the use of the identified asset and to obtain substantially all of the economic benefits from that use. (i) As a lessee (A) Policy applicable from 1 January 2019 At the lease commencement date, the Group recognises a right-of-use asset and a lease liability, except for short-term leases that have a lease term of 12 months or less and leases of low-value assets. When the Group enters into a lease in respect of a low-value asset, the Group decides whether to capitalise the lease on a lease-by-lease basis. The lease payments associated with those leases which are not capitalised are recognised as an expense on a systematic basis over the lease term. Where the lease is capitalised, the lease liability is initially recognised at the present value of the lease payments payable over the lease term, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, using a relevant incremental borrowing rate. After initial recognition, the lease liability is measured at amortised cost and interest expense is calculated using the effective interest method. Variable lease payments that do not depend on an index or rate are not included in the measurement of the lease liability and hence are charged to profit or loss in the accounting period in which they are incurred.