141 FINANCIAL STATEMENTS Depreciation is charged to write off the asset's carrying amount over its estimated useful life to its estimated residual value, using a method that best reflects the pattern in which the asset's economic benefits are consumed by the organisation. The useful lives of property, plant and equipment have been assessed as follows: Asset class Useful life/depreciation rate Land and buildings 0 - 10% Straight line Machinery 20% Straight line Motor vehicles 20% Straight line Fixtures and fittings 20% Straight line Office equipment 20% Straight line Computer equipment 20% Straight line Other fixed asset 20% Straight line When indicators are present that the useful life and residual values of items of property, plant and equipment have changed since the most recent annual reporting date, they are reassessed. Any changes are accounted for prospectively as a change in accounting estimate. Impairment tests are performed on property, plant and equipment when there is an indicator that they may be impaired. When the carrying amount of an item of property, plant and equipment is assessed to be higher than the estimated recoverable amount, an impairment loss is recognised immediately in profit or loss to bring the carrying amount in line with the recoverable amount. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its continued use or disposal. Any gain or loss arising from the derecognition of an item of property, plant and equipment, determined as the difference between the net disposable proceeds, if any, and the carrying amount of the item, is included in profit or loss when the item is derecognised. 2.8 INTANGIBLE ASSETS Intangible assets have a finite useful life and are carried at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of intangible assets over their estimated useful lives. Asset class Useful life/amortisation rate Computer software 33% Straight line 2.9 FINANCIAL INSTRUMENTS The group and organisation applies the provisions of Section 11 and 12 of IFRS for SMEs® Accounting Standard. Initial recognition A financial instrument is a contract that give rise to a financial asset of one entity and a financial liability or equity instrument in another entity. Financial instruments are recognised initially when the company becomes a party to the contractual provisions of the instruments. The entity classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of contractual arrangement. Classification is re-assessed on an annual basis. Initial measurement Financial instruments are initially measured at the transaction price (including transaction costs except in the initial measurement of financial assets and liabilities that are measured at fair value through profit or loss) unless the arrangement constitutes, in effect, a financing transaction in which case it is measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument. Financial instruments at amortised cost These include trust funds, loan to (from) group entities, cash and cash equivalents, trade and other receivables, and trade and other payables. Those debt instruments which meet the criteria in section 11.8 (b) of the standard, are subsequently measured at amortised cost using the effective interest method. Debt instruments which are classified as current assets or current liabilities are measured at the undiscounted amount of the cash expected to be received or paid, unless the arrangement effectively constitutes a financing transaction.
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