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2. PRINCIPAL ACCOUNTING POLICIES
2.5 Property and Equipment
Property and equipment, other than construction in progress, are stated at cost less accumulated depreciation and accumulated impairment losses.
Depreciation is provided to write off the cost of property and equipment, other than construction in progress, over their estimated useful lives and after taking into account their estimated residual value, using the straight-line method.
Construction in progress is stated at cost less any identified impairment loss and is not depreciated until completion of construction. Cost of completed construction works is transferred to appropriate categories of property, plant and equipment.
An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. The gain or loss arising from disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income and expenditure statement.
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Funds. Each year, an amount equal to the depreciation charges for the respective property and equipment is transferred fiom Deferred Capital Funds and credited to the income and expenditure statement.2.6
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2.6 Financial InstrumentsFinancial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted fiom the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
2.6 (a)
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2.6 (a) Accounts receivable and amounts due from subsidiariesAccounts receivable and amounts due from subsidiaries are measured at initial recognition at fair value, and are subsequently measured at mortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in income and expenditure statement when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.
2.6 (b)
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2.6 @) InvestmentsE B ~ ~ B ! A f i f f i f i ~ k ~ B # M 2 B
Investments are recognised and derecognised on aB$R@3BHS$@%EM%%%
trade date basis where the purchase or sale of an7?$E~%%~i%%FZ&25Z@J@l@
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tirnefiame established by the market concerned, and are initially measured at fair value, plus directly attributable transaction costs.At subsequent reporting dates, debt securities that the Group has the expressed intention and ability to hold to maturity (held-to-maturity debt securities) are measured at amortised cost using the effective interest rate method, less any impairment loss recognised to reflect irrecoverable amounts. An impairment loss is recognised in income and expenditure statement when there is objective evidence that the asset is impaired, and is measured as the difference between the investment's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. Impairment losses are reversed in subsequent periods when an increase in the investment's recoverable amount can be related objectively to an event occurring afier the recognition of the impairment loss, subject to the restriction that the carrying amount of the investment at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised.
Investments other than held-to-maturity debt securities are classified as either investments held for trading or as available-for-sale, and are measured at subsequent reporting dates at fair value. Where securities are held for trading purposes, gains and losses arising from changes in fair value are included in income and expenditure statement for the period. For available-for-sale investments, gains and losses arising from changes in fair value are recognised directly in fund balances, until the security is disposed of or is determined to be impaired, at which time the cumulative gains or losses previously recognised in fund balances are included in the income and expenditure statement for the period.
2.6 (d)
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2.6 (d)For available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery such unquoted equity instruments, they are measured at cost less any identified impairment losses at each balance sheet date subsequent to initial recognition. An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired. The amount of the impairment loss is measured as the difference between the carrying amount of the asset and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses will not reverse in subsequent periods.
Impairment losses recognised in income and expenditure statement for equity investments classified as available-for-sale are not subsequently reversed through income and expenditure statement. Impairment losses recognised in income and expenditure statement for debt instruments classified as available-for- sale are subsequently reversed if an increase in the fair value of the instrument can be objectively related to an event occurring after the recognition of the impairment loss.
Accounts payable and accruals, deferred income and amounts due to subsidiaries
Accounts payable and accruals, deferred income and amounts due to subsidiaries are initially measured at fair value, and are subsequently measured at mortised cost, using the effective interest rate method.
Cash and cash equivalents
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Cash and cash equivalents comprise cash on handl Y i J B & - %%@k
o and demand deposits.2.6 (e) Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the management's best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.
Stocks
Stocks held for resale in respect of self-financing operations are valued at the lower of cost and net realisable value. Cost is calculated using the weighted average method.
Impairment
At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount.
Impairment loss is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, such that the increased carrying amount does not exceed the canying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.
Income
Government subventions and designated donations are recognised as income over the periods necessary to match them with the related expenditure. Any Recurrent Block Grant in excess of related expenditure is recognised as income and transferred to the General and Development Reserve Fund in accordance with the prevailing University Grant Committee's guidelines.