Consolidated Profit And Loss Account Page 9


Investment properties
Investment properties are defined as properties which are income producing and intended to be
held for the long-term, and such properties are included in the balance sheet at their open market
value, on the basis of an annual professional valuation, less depreciation where the investment
properties are held on leases with unexpired periods of 20 years or less. Changes in the value of
investment properties are dealt with as movements in the investment property revaluation reserves.
If the total of these reserves is insufficient to cover a deficit, on a portfolio basis, the excess of the
deficit is charged to the profit and loss account. When a surplus arises on subsequent revaluation
on a portfolio basis, it will be credited to the profit and loss account if and to the extent that a
deficit on revaluation had previously been charged to the profit and loss account.
On disposal of investment properties, the revaluation surplus or deficit previously taken to
investment property revaluation reserves is included in calculating the profit or loss on disposal.
(ii) Properties under development for sale
Properties under development for sale are classified under current assets and stated at the lower of
cost, including capitalised borrowing costs, and net realisable value. Net realisable value is
determined by management, based on prevailing market conditions.
The amount of any write down of or provision for properties under development for sale is
recognised as an expense in the period the write down or loss occurs. The amount of any reversal
of any write down or provision arising from an increase in net realisable value is recognised in the
profit and loss account in the period in which the reversal occurs.
Borrowing costs on loans relating to properties under development for sale are capitalised up to the
date of practical completion of development.
Profit on pre-sale of properties under development for sale prior to 1 January 2005 is recognised
over the course of the development and is calculated each year as a proportion of the total
estimated profit to completion, the proportion used being the lower of the proportion of
construction costs incurred at the balance sheet date to estimated total construction costs and the
proportion of sales proceeds received and receivable at the balance sheet date to total sales
proceeds in respect of the units sold.
With the introduction of the HK Interpretation 3 “Revenue – Pre-Completion contracts for the sale
of development properties” issued by the HKICPA, the Group now recognises revenue arising from
pre-sale of properties upon completion of the development of the property. The Group has relied
on the transitional provisions set out in the Interpretation such that the Group will continue to
adopt the stage of completion method to recognise revenue arising from pre-sale contracts
entered into before 1 January 2005 while the completion method has been adopted for pre-sale
contracts entered into after 1 January 2005.
Wheelock and Company Limited Annual Report 2004/05


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