Page 68 - Annual Report

HONG KONG ACADEMY OF MEDICINE
香港醫學專科學院
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

d) Property, plant and equipment (Continued)

Where parts of an item of property, plant and equipment have different useful lives, the
cost of the item is allocated on a reasonable basis between the parts and each part is
depreciated separately. Both the useful life of an asset and its residual value, if any, are
reviewed annually.

Gains or losses arising from the retirement or disposal of an item of property, plant and
equipment are determined as the difference between the net disposal proceeds and the
carrying amount of the item and are recognised in the income and expenditure account
on the date of retirement or disposal.

Construction in progress include property, plant and equipment in the course of
construction for production, supply or administrative purposes are carried at cost, less
any recognised impairment loss. Cost includes professional fees and, for qualifying
assets, borrowing costs capitalised in accordance with the Academy’s accounting policy.
Such properties, plant and equipment are classified to the appropriate categories of
property, plant and equipment when completed and ready for intended use. Depreciation
of these assets, on the same basis as other property assets, commences when the
assets are ready for their intended use.

e) Leased assets

At inception of a contract, the Group assesses whether the contract is, or contains, a
lease. A contract is, or contains, a lease if the contract conveys the right to control the
use of an identified asset for a period of time in exchange for consideration. Control is
conveyed where the customer has both the right to direct the use of the identified asset
and to obtain substantially all of the economic benefits from that use.

As a lessor

When the Group acts as a lessor, it determines at lease inception whether each lease is
a finance lease or an operating lease. A lease is classified as a finance lease if it
transfers substantially all the risks and rewards incidental to the ownership of an
underlying assets to the lessee. If this is not the case, the lease is classified as an
operating lease. When a contract contains lease and non-lease components, the Group
allocates the consideration in the contract to each component on a relative stand-alone
selling price basis. The rental income from operating leases is recognised in accordance
with note 3(n). When the Group is an intermediate lessor, the sub-leases are classified
as a finance lease or as an operating lease with reference to the right-of-use asset
arising from the head lease. If the head lease is a short-term lease to which the Group
applies the exemption, then the Group classifies the sub-lease as an operating lease.

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66 HKAM Annual Report 2021