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Notes to the Financial Statements
Washington H. Soul Pattinson and Company Limited
Annual Report 2016
104
Fixed Assets
NOTE 25
PROPERTY, PLANT AND EQUIPMENT
25
Accounting policy –
Property, plant and equipment
Freehold land is carried at the lower of cost and recoverable amount.
Property, plant and equipment, (excluding investment properties, refer to note 12), are stated at historical
cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly
attributable to the acquisition of the items. Cost may also include transfers from equity relating to any gains/
losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. The cost of
self-constructed assets includes the cost of materials, direct labour, the initial estimate where relevant, of the cost
of dismantling and removing the items and restoring the site under which they are located and an appropriate
portion of production overhead.
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. All other repairs and maintenance are charged to the income statement
during the reporting period in which they are incurred.
The depreciable amount of all fixed assets including buildings and capitalised lease assets, but excluding freehold
land, is depreciated commencing from the time the asset is held ready for use.
Depreciation is calculated so as to write off the cost of each item of property, plant and equipment during its
expected economic life to the Consolidated entity. Each item’s useful life has due regard both to its own physical
life limitations and to present assessments of economically recoverable resources (when related to mining
activities). Estimates of residual values and remaining useful lives are made on an annual basis. The straight
line method is predominately used (Copper float and solvent extraction plants are depreciated on the units of
production method). The expected useful life of plant and equipment is 4 to 20 years, buildings is 25 to 40 years
and motor vehicles is 4 to 8 years. Land is not depreciated.
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount
is greater than its recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in
the income statement.
Accounting policy –
Mine development costs, mining reserves and leases and oil producing
assets
Development expenditure incurred by the Group is accumulated separately for each area of interest in which
economically recoverable mineral and oil resources have been identified to the satisfaction of the Directors. Direct
development expenditure, pre-operating mine start-up costs, and an appropriate portion of related overhead
expenditure are capitalised as mine development costs up until the relevant mine is in commercial production.
Mining reserves, leases and mine development costs are amortised over the estimated productive life of each
applicable mine on either a unit of production basis or years of operation basis, as appropriate. Amortisation
commences when a mine commences commercial production.
The cost of acquiring mineral reserves and mineral resources are capitalised in the statement of financial position
as incurred.
Oil producing assets are amortised on a unit of production basis. The method uses the actual costs of the asset to
date plus all its projected future costs. Amortisation commences when an area of interest is ready for use.
Impairment of non-current assets
Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less cost to sell and its value in use. For the
purposes of assessing impairment under value in use testing, assets are grouped at the lowest levels for which
there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets
or groups of assets (cash-generating units). Annual assessments of impairments reversals are undertaken.
All property, plant and equipment allocated to cash generating units (CGU’s) containing goodwill must be tested
for impairment at the CGU level on an annual basis. Other property, plant and equipment assets must also be
tested for impairment when impairment indicators are identified.