Notes to the Accounts Status of the Electrical and Mechanical Services Trading Fund The Electrical and Mechanical Services Trading Fund was established on 1 August 1996 under the Legislative Council Resolution passed on 26 June 1996 pursuant to sections 3, 4 and 6 of the Trading Funds Ordinance (Cap. 430). With effect from 1 August 1999, government bureaux, departments and autonomous bodies (user departments) can be untied from using services provided by the Electrical and Mechanical Services Trading Fund under a phased programme over a three-year period. Upon untying, user departments are free to retain the services of the Electrical and Mechanical Services Trading Fund or to choose alternative service providers to meet part or all of their electrical and mechanical service needs. Accounting policies Basis of accounting The accounts have been prepared in accordance with generally accepted accounting principles. Fixed assets Fixed assets appropriated to the Electrical and Mechanical Services Trading Fund on 1 August 1996 are stated at the value contained in the Legislative Council Resolution for the setting up of the Electrical and Mechanical Services Trading Fund. Fixed assets acquired since 1 August 1996 and costing more than $100,000 on an individual basis are capitalised at the actual direct expenditure of acquisition and installation with the exception of motor vehicles which are treated as fixed assets regardless of value. Depreciation Depreciation is provided on a straight-line basis calculated to write off the cost of assets less residual value over their estimated useful lives. The annual rates of depreciation used are:-       Building 5%-10% Computer systems and equipment 20%-25% Plant and equipment 14% Motor vehicles 20% Furniture and fixtures 20% Land is regarded as a non-depreciating asset. Deferred tax Deferred tax is provided, by using the liability method, in respect of the taxation effect arising from all timing differences which are expected with reasonable probability to crystallize in the foreseeable future. Revenue recognition Revenue is recognized as services are provided. Interest income is recognized on an accrual basis. Stocks and work in progress Stocks and work in progress are stated at the lower of cost and net realizable value. Work in progress represents jobs in progress as at 31 March 1999. Related parties The Electrical and Mechanical Services Trading Fund is a separate accounting entity within the Government of the Hong Kong Special Administrative Region (the Government) established under the Trading Funds Ordinance. During the year, the Electrical and Mechanical Services Trading Fund had transactions with various related parties, including Government bureaux and departments, trading funds and financially autonomous bodies controlled or significantly influenced by the Government, in the ordinary course of its business.