2. Significant accounting policies (CONT’D.)
2.5 Summary of significant accounting policies (cont’d.)
(q) Leases
(i) Finance lease
A lease is recognised as a finance lease if it transfers substantially to the Group and the Company
all the risks and rewards incidental to ownership. Finance leases are capitalised at the inception
of the lease at the fair value of the leased asset or, if lower, at the 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 and the Company 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.
(ii) Operating lease
Leases of assets under which substantial risks and rewards incidental to ownership are retained
by the lessor are classified as operating leases.
Operating lease payments are recognised as an expense in profit or loss on a straight line basis
over 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.
The tenure of the Group’s leasehold lands range from 30 to 90 years (2014: 30 to 90 years).
(r) Goodwill
After initial recognition, goodwill is stated at cost less any accumulated impairment losses. Goodwill
is not amortised, but instead, it is reviewed for impairment annually and whenever events or changes
in circumstances indicate that the carrying value may be impaired.
For the purpose of impairment testing, goodwill allocated to the related cash-generating unit is
monitored by management, usually at business segment level or statutory company level as the case
may be. Where the recoverable amount of the cash-generating unit is less than its carrying amount,
including goodwill, an impairment loss is recognised in profit or loss. An impairment loss recognised
for goodwill is not reversed in a subsequent period.
Gains and losses on the disposal of an entity include the carrying amount of the goodwill relating to
the entity sold.
n otes to th e f i nan c i a l statements
Bo ustead plantati o ns Berhad
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