notes to the financial statements
for the financial year ended 31 December 2014 (Continued)
2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.8 Leases
A lease is an agreement whereby the lessor conveys to the lessee in return for a payment, or series of payments, the right to use an asset for an agreed period
of time.
Accounting as lessee
(a)
Finance lease
Leases of property, plant and equipment where the Group assumes substantially all the benefits and risks of ownership are classified as finance leases.
Finance leases are capitalised at the lower of the fair value of the leased assets and the estimated present value of the minimum lease payments at
the date of inception. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the lease principal
outstanding. The corresponding rental obligations, net of finance charges, are included in borrowings. The interest element of the finance charge is
charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each
period. Contingent rent, if any, are charged as expenses in the periods which they are incurred.
Property, plant and equipment acquired under finance lease contracts are depreciated over the shorter of the lease term and its useful life.
Initial direct costs incurred by the Group in negotiating and arranging finance leases are added to the carrying amount of the leased assets and
recognised as an expense in profit or loss over the lease term on the same basis as the lease expense.
(b)
Operating leases
Leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.
Payments made under operating leases are charged to the profit or loss on a straight line basis over the lease period.
Accounting as lessor
Operating leases
The Group leases its investment properties under operating leases to non-related parties.
Leases of investment properties, where the Group retains substantially all risks and rewards incidental to ownership, are classified as operating leases. Rental
income from operating leases is recognised in profit or loss on a straight line basis over the lease term. Contingent rents are recognised as revenue in the period
in which they are earned.
2.9 Prepaid lease payments
Leasehold land that has a definite economic life and title is not expected to pass to the lessee by the end of the lease term is treated as operating lease. Prepaid
lease payments are carried at cost or surrogate carrying amount and are amortised on a straight line basis over the lease terms in accordance with the pattern
of benefits provided.
At each reporting date, the Group assesses whether there is any indication of impairment. Where an indication of impairment exists, the carrying value of the
prepaid lease asset is assessed and written down immediately to its recoverable amount. See accounting policy 2.15 on impairment of non-financial assets.
Leasehold land is amortised over the remaining period of the respective leases ranging from 24 to 96 years (2013: 25 to 97 years).
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Wah Seong Corporation Berhad • Annual Report 2014
