Kumpulan Fima Berhad
Notes to the
31 march 2017
Significant accounting policies (cont’d.)
2.3 Summary of significant accounting policies (cont’d.)
Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership
of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if
lower, at present value of the minimum lease payments. Any initial direct costs are also added to the amount
capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability
so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are
charged to profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are
Leased assets are depreciated over the estimated useful life of the asset. However, if there is no reasonable
certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the
shorter of the estimated useful life and the lease term.
Operating lease payments are recognised as an expense on a straight-line basis over the term of the lease
term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental
expense over the lease term on a straight-line basis.
Leases where the Group and the Company retain substantially all the risks and rewards of ownership of the
asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are
added to the carrying amount of the leased asset and recognised over the lease term on the same basis as
rental income. The accounting policy for rental income is set-out in Note 2.3(d)(ii).
Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any
such indication exists, or when an annual impairment assessment for an asset is required, the Group makes an
estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For
the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows (cash- generating units (“CGU”)).
In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted
to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount,
the asset is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups
of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of
units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis.