NOTES TO
FINANCIAL STATEMENTS
63
GDS Global Limited Annual Report 2015
As at 30 September 2015
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
The estimated useful lives, residual values and depreciation method are reviewed at each year end,
with the effect of any changes in estimate accounted for on a prospective basis.
Assets held under finance leases are depreciated over their expected useful lives on the same basis
as owned assets or, if there is no certainty that the lessee will obtain ownership by the end of the
lease term, the asset shall be fully depreciated over the shorter of the lease term and its useful life.
The gain or loss arising on disposal or retirement of an item of property, plant and equipment is
determined as the difference between the sales proceeds and the carrying amounts of the asset
and is recognised in profit or loss.
INVENTORIES - Inventories are stated at the lower of cost and net realisable value. Cost comprises
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 first-in, first-out 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.
INTANGIBLE ASSETS - Intangible assets acquired separately are reported at cost less accumulated
amortisation (where they have finite useful lives) and accumulated impairment losses. Intangible
assets with finite useful lives are amortised on a straight-line basis over their estimated useful
lives. The estimated useful lives and amortisation method are reviewed at the end of each annual
reporting period, with the effect of any changes in estimate being accounted for on a prospective
basis.
IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS - At the end of each reporting period,
the Group reviews the carrying amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of
an individual asset, the Group estimates the recoverable amount of the cash-generating unit to
which the asset belongs. Where a reasonable and consistent basis of allocation can be identified,
corporate assets are also allocated to individual cash-generating units, or otherwise they are
allocated to the smallest group of cash-generating units for which a reasonable and consistent
allocation basis can be identified.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than
its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating
unit) is increased to the revised estimate of its recoverable amount, but so that the increased
carrying amount does not exceed the carrying amount that would have been determined had no
impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of
an impairment loss is recognised immediately in profit or loss.
