NOTES TO
FINANCIAL STATEMENTS
December 31, 2015
63
CITIC ENVIROTECH LTD.
Annual
Report
2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.6 Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
The Group as lessee
Assets held under finance leases are recognised as assets of the Group at their fair value at
the inception of the lease or, if lower, at the present value of the minimum lease payments. The
corresponding liability to the lessor is included in the statement of financial position as a finance
lease obligation. Lease payments are apportioned between finance charges and reduction of
the lease obligation so as to achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are charged directly to profit or loss, unless they are directly attributable to
qualifying assets, in which case they are capitalised.
Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the
term of the relevant lease unless another systematic basis is more representative of the time pattern
in which economic benefits from the leased asset are consumed. Contingent rentals arising under
operating leases are recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are
recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental
expense on a straight-line basis, except where another systematic basis is more representative of the
time pattern in which economic benefits from the leased asset are consumed.
2.7 Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be
recovered principally through a sale transaction rather than through continuing use. This condition is
regarded as met only when the sale is highly probable and the asset (or disposal group) is available
for immediate sale in its present condition. Management must be committed to the sale, which
should be expected to qualify for recognition as a completed sale within one year from the date of
classification.
When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets
and liabilities of that subsidiary are classified as held for sale when the criteria described above are
met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary
after the sale.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their
previous carrying amount and fair value less costs to sell.
2.8 Inventories
Inventories are stated at the lower of cost and net realisable value. Costs comprise direct materials
and, where applicable, direct labour costs and those overheads that have been incurred in bringing
the inventories to their present location and condition. Cost is calculated using the weighted
average method. Net realisable value represents the estimated selling price less all estimated costs
of completion and costs to be incurred in marketing, selling and distribution.
