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Notes to the Financial Statements 2018
Long-term Investments This section details the long-term assets of the Group including Property, Plant and Equipment and Intangible Assets.
20. Property, plant and equipment
Property, plant and equipment comprises the following categories: • Land • Buildings • Plant and Machinery • Fixtures and equipment • Resource extraction • Leased assets (leased under a finance lease arrangement)
Land, buildings, plant and machinery, finance leased assets and fixtures and equipment are stated at cost, less accumulated depreciation. The cost of purchasing land, buildings, plant and machinery, fixtures and equipment is the value of the consideration given to acquire the assets and the value of other directly attributable costs which have been incurred in bringing the assets to the location and the condition necessary for their intended service, including subsequent expenditure. The costs of self-constructed assets include, where appropriate, the costs of all materials used in construction, direct labour on the project, site preparation and installation costs, costs of obtaining resource consents, financing costs attributable to the project, variable and fixed overheads and unrecovered operating costs incurred during planned commissioning. Costs cease to be capitalised as soon as the asset is in the location and condition necessary for it to be capable of operating in the manner intended by management. All feasibility costs are expensed as incurred. Resource extraction assets are held at historic cost and depleted over the shorter of the life of the site or right to use period. Site development costs incurred in order to commence extraction are capitalised as resource extraction assets. Impairment is deemed to occur when the recoverable amount of an asset falls below its carrying value. The recoverable amount is determined to be the greater of the fair value, less disposal costs or the sum of expected future discounted net cash flows arising from the ownership of the asset. Future net cash flows take into account the remaining useful life and the expected period of continued ownership, including any intended disposals, and any costs or proceeds expected to eventuate at the end of the remaining useful life or the end of the expected period of continued ownership. For the purposes of considering whether there has been an impairment, assets are grouped at the lowest level for which there are identifiable cash inflows that are largely independent of the cash flows of other groups of assets. When the book value of a group of assets exceeds the recoverable amount, an impairment loss arises and is recognised in earnings immediately. Leases in which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases and are measured at the lower of their fair value or the present value of the minimum lease payments at the inception of the lease. Finance leases are capitalised to reflect the borrowings incurred and the cost of the asset acquired. Such obligations are classified within borrowings. The finance cost portion of lease payments is expensed to the income statement over the lease period. The leased asset is depreciated on a straight line basis over the estimated useful life of the asset with regard to residual values. Depreciation of property, plant and equipment and amortisation of definite lived intangible assets are calculated on the straight line method. Refer to note 22 for details of intangible assets. Expected useful lives, which are regularly reviewed, typically range between: Buildings 30-50 years Plant and machinery 5-15 years Fixtures and equipment 2-10 years Leased assets capitalised 3-30 years Intangible assets, including software (note 22) 5-15 years
Finance leases
86 Fletcher Building Limited Annual Report 2018
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