Annual Reports Keepmoat Homes Annual Report 2018 | Page 33

Principal consolidated accounting policies
Property, plant and
equipment
All property, plant and equipment is stated at cost less
accumulated depreciation and any recognised impairment
losses.
The cost of tangible fixed assets is their purchase cost,
together with any incidental expenses of acquisition.
Depreciation is calculated so as to write off the cost of each
asset, less their estimated residual value, on a straight line
basis over their estimated useful economic lives or until the
date of disposal.
The principal annual rates used for this purpose are:
%
2
Freehold properties
Leasehold properties improvements Over the
lease term
Plant, equipment, fixtures and fittings 10–50
No depreciation is provided on freehold land.
Investment Properties
Investment properties are initially measured at cost, being
purchase price including directly attributable expenditure.
Investment properties are subsequently measured at fair
value.
The carrying amount of trade receivables are reduced
through the use of a provision for impairment losses. When
a trade receivable is wholly or partially uncollectible, any
uncollectible amount is written off against the provision.
Subsequent recoveries of amounts previously written off
are credited against the provision. Changes in the carrying
amount of the provision are recognised in the income
statement.
Impairment of
financial assets
Financial assets are impaired where there is objective
evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset,
the estimated future cash flows of the asset have been
reduced. For loans and receivables, the amount of the
impairment is the difference between the asset’s carrying
amount and the present value of estimated future cash
flows, discounted at the original effective interest rate.
The carrying amount of financial assets is reduced by the
impairment loss directly for all financial assets except trade
receivables.
If, in a subsequent period, the amount of the impairment
loss previously recognised decreases and the decrease can
be objectively related to an event that occurred after the
impairment was recognised, the previously recognised
impairment loss is reversed through the income statement.
Inventories
Operating leases Inventories are valued at the lower of cost and net realisable
value.
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as
operating leases. Payments made under operating leases
(net of any incentives received from the lessor) are charged
to the income statement on a straight-line basis over the
period of the lease. (a) Land held for and under development
The Group rents surplus property under short and medium-
term arrangements. Income is recognised over the period
of lease when the Group can reliably measure likely flow
of economic benefits. These are treated as operating lease
arrangements.
Land held for and under development includes land
purchase costs and costs directly attributable to enhancing
land value.
Land may be acquired at a reduced cost, with a commitment
to subsequently sell developments at a similarly reduced
selling price. In such cases the value of the land is adjusted
to reflect its fair value, while the discount on the sale of
developments is recognised as deferred income within
development land payables.
(b) House-building developments in progress
Trade receivables
Trade receivables are initially recognised at fair value and are
subsequently measured at amortised cost using the effective
interest rate method with an appropriate allowance for
estimated irrecoverable amounts recognised in the income
statement when there is objective evidence that the asset is
impaired.
House-building developments in progress are valued at the
lower of cost and net realisable value. Cost comprises direct
expenditure, together with an appropriate proportion of
production overheads. Net realisable value represents the
estimated amount at which inventory could be realised after
allowing for costs of completion and realisation.
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