78.
INDOFOOD AGRI RESOURCES LTD
ANNUAL REPORT 2015
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For the financial year ended 31 December 2015
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.7
Property, plant and equipment
All property, plant and equipment are initially recognized at cost, which comprises its purchase price and any costs
directly attributable in bringing the asset to its working condition and to the location where it is intended to be used.
Such cost also includes initial estimation at present value of the costs of dismantling and removing items of property,
plant and equipment in certain CPO refinery and fractionation plants and margarine plants of the Group located in
rented sites, costs of restoring the said rented sites, as well as costs of replacing part of such property, plant and
equipment when that cost is incurred, if the recognition criteria are met.
Subsequent to initial recognition, property, plant and equipment are carried at cost less any subsequent accumulated
depreciation and impairment losses.
Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows:
•
Land use rights
8 to 40 years
•
Buildings and improvements
10 to 25 years
•
Plant and machinery
4 to 20 years
•
Heavy equipment, transportation equipment and vessel
5 to 20 years
•
Furniture, fixtures and office 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 residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted
prospectively, if appropriate.
An item of property, plant and equipment is de-recognised upon disposal or when no future economic benefits are
expected from its use or disposal. Any gain or loss on de-recognition of the asset is included in profit or loss in the year
the asset is de-recognised.
Repairs and maintenance costs are taken to the profit or loss when they are incurred. The cost of major renovation and
restoration is included in the carrying amount of the related asset when it is probable that future economic benefits in
excess of the originally assessed standard of performance of the existing asset will flow to the Group, and is depreciated
over the remaining useful life of the related asset.
2.8
Biological assets
Biological assets, which primarily comprise of oil palm, rubber, sugar cane and timber plantations are stated at fair
value less costs to sell. Gains or losses arising on initial recognition of biological assets at fair value less costs to sell
and from the change in fair value less costs to sell of biological assets at each reporting date are included in profit or
loss for the period in which they arise.
The fair values of the biological assets is determined in accordance with the provisions of FRS 41 Agriculture and
FRS 113 Fair Value Measurement. Such fair values are computed by independent professional valuers using the
discounted cash flows of the underlying biological assets. The expected net cash flows from the whole life cycle of the
oil palm, rubber, sugar cane and timber plantations are determined using the projected market prices of the estimated
yields of fresh fruit bunches (“FFB”), cup lump, sugar cane and felled trees, respectively, net of maintenance and
harvesting costs, and any costs required to bring the oil palm, rubber, sugar cane and timber plantations to maturity.
The estimated yields of the oil palm, rubber, sugar cane and timber plantations are dependent on the age of the
oil palm, rubber, sugar cane and timber trees, and the location, soil type and infrastructure of the plantations. The
projected market price of FFB, rubber, sugar cane and felled trees are largely dependent on the prevailing market price
of CPO and palm kernel oil (PKO), RSS1 and other rubber products of the Group, sugar and logs, respectively.
