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Kumpulan Fima Berhad

(11817-V)

146

Notes to the

financial statements

31 march 2017

2.

Significant accounting policies (cont’d.)

2.3 Summary of significant accounting policies (cont’d.)

(n)

Leases

(i)

As lessee

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

incurred.

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.

(ii)

As lessor

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).

(o)

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.