BIRLESIM_2021_ANNUAL REPORT

BİRLEŞİM MÜHENDİSLİK 2021 ANNUAL REPORT 158 Birleşim Mühendislik Isıtma Soğutma Havalandırma Sanayi Ticaret A.Ş. and Its Subsidiary (All amounts expressed in Turkish Lira (“TL”)) Notes to the Consolidated Financial Statements For the Year Ended 31 December 2021 2. BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) (k) Summary of Significant Accounting Policies (continued) Inventories Inventories are stated at the lower of cost and net realizable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventories held by the method most appropriate to the particular class of inventory, with the majority being valued on a weighted average basis. Net realizable value represents the estimated selling price less all estimated costs of completion and costs necessary to make the sale. When the net realizable value of inventory is less than cost, the inventory is written down to the net realizable value and the expense is included in statement of profit and loss in the period the write-down or loss occurred. When the circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic circumstances, the amount of the write- down is reversed. The reversal amount is limited to the amount of the original write-down. Property, plant and equipment Property, plant and equipments are measured at cost less accumulated depreciation and any accumulated impairment losses. The cost amounts of tangible assets, except land and construction in progress, are depreciated on a straight-line basis over their estimated useful lives. Expected useful life, residual value and depreciation method are reviewed every year for the possible effects of the changes occurring in the estimates and are accounted for prospectively if there is a change in estimates. The estimated useful lives of these assets are stated below. Useful Life Buildings 50 years Machinery and equipment 4 - 20 years Vehicles 5 years Furniture and Fixtures 3 - 15 years Other tangible Assets 3 years Leasehold Improvements 3 - 15 years Borrowing costs are capitalized for assets that need substantial time to prepare the asset for its intended use or sale. Legal fees are also included in cost. When these assets are constructed and ready for use they are classified into the relevant tangible assets. As the similar depreciation method used for other fixed assets, depreciation of such assets begins when they are available for use. Regular maintenance and repair expenses on tangible assets are recognized as expense. Investment expenditures that increase the future benefit of the tangible asset by increasing its capacity are added to the cost of the tangible asset. Extensive maintenance and repair expenses, including spare parts replacement and labor costs, are activated and depreciated within their average lifetime during the next major maintenance. When a tangible asset is disposed of or if no future economic benefits are expected from its use or sale, it is derecognized. The gain or loss arising on the disposal or retirement of an item of property and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.