b'NOTES TO THE FINANCIAL STATEMENTS >for the year ended 30 June 2019NOTE 1. SIGNIFICANT ACCOUNTING POLICIESCONTINUEDINVENTORIES A distinction is made between finance leases, which effectively Inventories include consumable stores, food and beveragestransfer from the lessor to the lessee substantially all the risks and are carried at the lower of cost and net realisable value.and benefits incidental to ownership of leased assets, and Cost is determined on a first-in-first-out basis and comprisesoperating leases, under which the lessor effectively retains all costs of purchases, conversion and other costs incurredsubstantially all such risks and benefits.in bringing the inventories to their present location andOperating lease payments, net of any incentives received from condition. Net realisable value is the estimated selling price the lessor, are charged to the statement profit or loss and in the ordinary course of business, less the estimated costs other comprehensive income on a straight-line basis overof completion and selling expenses. the term of the lease.When inventories are sold, the carrying amount of thoseINTANGIBLE ASSETSinventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write- Land rightsdown of inventories to net realisable value and all losses ofThe intangible asset includes costs incurred to acquire interests inventories are recognised as an expense in the period of thein the usage of land in the Socialist Republic of Vietnam for the write-down or loss occurs. The amount of any reversal of anyoriginal hotel, located in Lao Cai. The term of the agreement write-down of inventories, arising from an increase in netis 30 years from the initial licencing date of 19 July 2002. realisable value, is recognised in the statement of profit or lossThese land use rights are stated at cost less accumulated and other comprehensive income, in the period in which theamortisation. Amortisation is calculated on a straight-line basis reversal occurs. over a period of 30 years, from the licencing date. At the expiry of the land term it is expected that the relevant state body will PROPERTY, PLANT AND EQUIPMENT consider an application for extension.Property, plant and equipment is stated at historical cost less accumulated depreciation and impairment. HistoricalCasino licensecost includes expenditure that is directly attributable to theThe group consider casino licenses to be intangible assets with acquisition of the items. indefinite useful lives. Accordingly, they are not amortised Depreciation is calculated on a straight-line basis to write offand are tested annually for impairment or more frequently if the net cost of each item of property, plant and equipmentevents or changes in circumstances indicate that it might be (excluding land) over their expected useful lives as follows: impaired, and are carried at cost less accumulated impairment losses. Impairment losses on casino licenses are recognised in Buildings and structures2550 years the profit or loss.Leasehold improvements25 years GoodwillMachinery and equipment515 yearsGoodwill arises on the acquisition of a business. Goodwill Motor vehicles56 years is not amortised. Instead, goodwill is tested annually for Office equipment and other38 years impairment, or more frequently if events or changes in Furniture and fittings38 years circumstances indicate that it might be impaired, and Consumables18 years is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or lossThe residual values, useful lives and depreciation methods areand are not subsequently reversed.reviewed, and adjusted if appropriate, at each reporting date.An item of property, plant and equipment is derecognisedPREPAID CONSTRUCTION COSTSupon disposal or when there is no future economic benefit toAmounts recognised as prepaid construction costs relate the consolidated entity. Gains and losses between the carryingto tranche payments made to third-party developers in amount and the disposal proceeds are taken to profit or loss. connection with the construction of the new Lao Cai Casino. Tranche payments are made in advance of construction LEASES work being performed in accordance with the terms of the The determination of whether an arrangement is or containscontractor agreements; however, once associated works have a lease is based on the substance of the arrangement andbeen completed an amount equal to the tranche payment is requires an assessment of whether the fulfilment of thetransferred from prepaid construction costs to constructionarrangement is dependent on the use of a specific asset orin progress. Once recognised as part of construction in assets and the arrangement conveys a right to use the asset. progress the amounts are then carried on the statement 46 DONACO INTERNATIONAL LIMITED 2019 ANNUAL REPORT'