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Notes to the Financial Statements
For the fnancial year ended 31 December 2012
3. Summary of significant accounting policies (cont’d)
3.7 Property, plant and equipment (cont’d)
Depreciation of an asset begins when it is available for use and is computed on a straight-line method over the estimated useful
lives of the asset as follows:
• Land use rights – 8 to 48 years
• Buildings and improvements – 5 to 25 years
• Plant and machinery – 4 to 20 years
• Heavy equipment, transportation equipment and vessel – 3 to 20 years
• Furniture, fxtures and offce equipment – 4 to 10 years
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances
indicate that the carrying value may not be recoverable.
The carrying amount of an item of property, plant and equipment is derecognised upon disposal or when no future economic benefts
are expected from its use or disposal. Any gain or loss arising from the derecognition of the asset is included in the consolidated
statement of comprehensive income in the year the asset is derecognised.
The assets residual values, useful lives and depreciation method are reviewed at each year end and adjusted prospectively if necessary.
The cost of construction-in-progress represents all costs incurred on the construction of the assets. The accumulated costs will
be reclassifed to the appropriate property, plant and equipment account when the construction is completed. No depreciation is
provided on construction-in-progress.
Interest on borrowings to fnance the construction of property, plant and equipment is capitalised during the period of time that is
required to complete and prepare each asset for its intended use.
Repair and maintenance costs are taken to the consolidated statement of comprehensive income during the period in which they
are incurred. The cost of major renovation and restoration is included in the carrying amount of the asset when it is probable that
future economic benefts in excess of the originally assessed standard of performance of the existing asset will fow to the Group,
and is depreciated over the remaining useful life of the asset.
Assets under fnance lease are recognised at the lower of the present value of the minimum lease payments and the fair value of
the asset.
3.8 Biological assets
Biological assets, which primarily comprise oil palm, rubber and sugar cane plantations, are stated at fair value less estimated
point-of-sale costs. Gain or loss arising on initial recognition of plantations at fair value less estimated point-of-sale costs and from
the change in fair value less estimated point-of-sale costs of plantations at each reporting date are included in the consolidated
statement of comprehensive income of the period in which they arise.
The fair value of the plantations is estimated by reference to independent professional valuations using the discounted cash fows
of the underlying biological assets, mainly oil palm, rubber and sugar cane. The expected cash fows from the whole life cycle of
the oil palm, rubber and sugar cane plantations are determined using the market prices of the estimated yields of the fresh fruit
bunches (“FFB”), cup lump and sugar cane, respectively, net of maintenance and harvesting costs, and any costs required to
bring the oil palm, rubber and sugar cane plantations to maturity. The estimated yields of the oil palm, rubber and sugar cane
plantations are dependent on the age of the oil palm, rubber and sugar cane trees, the location of the plantations, soil type and
infrastructure. The market prices of the FFB, rubber and sugar cane are largely dependent on the prevailing market prices of the
crude palm oil and palm kernel oil, RSS1 and other rubber products of the Group, and sugar respectively.
Indofood Agri Resources Ltd. • Annual Report 2012 73