Frontken Berhad Annual Report 2019

135 Frontken Corporation Berhad (651020-T) ANNUAL REPORT 2019 32. CASH FLOW INFORMATION (CONT’D) (c) The total cash outflows for leases as a lessee are as follows:- The Group The Company 2019 2019 RM RM Payment of short-term leases 1,449,156 - Payment of low value assets 29,410 - Interest paid on lease liabilities 665,726 9,480 Payment of lease liabilities 2,366,158 92,640 4,510,450 102,120 33. SIGNIFICANT EVENT OCCURRING AFTER THE REPORTING PERIOD The outbreak of Coronavirus Disease 2019 (COVID-19) in early 2020 has affected the business and economic environments of the Group and hence, may impact its performance and financial position in the future. However, given the unpredictability associated with the COVID-19 outbreak and any further contingency measures that may be put in place by the governments and various private corporations, the potential financial impact of the COVID-19 outbreak on the Group’s 2020 financial statements, if any, could not be reasonably quantified at this juncture. 34. INITIAL APPLICATION OF MFRS 16 The Group has adopted MFRS 16 using the modified retrospective approach under which the cumulative effect of initial application is recognised as an adjustment to the retained profits as at 1 January 2019 (date of initial application) without restating any comparative information. The Group has applied MFRS 16 only to contracts that were previously identified as leases under MFRS 117 ‘Leases’ and IC Interpretation 4 ‘Determining Whether an Arrangement Contains a Lease’. Therefore, MFRS 16 has been applied only to contracts entered into or changed on or after 1 January 2019. (a) Lessee Accounting At 1 January 2019, for leases that were classified as operating leases under MFRS 117, the Group measured the lease liabilities at the present value of the remaining lease payments, discounted using the Group’s incremental borrowing rate at that date of 4.9%. The right-of-use assets were measured at their carrying amount as if MFRS 16 had been applied since the commencement date, discounted using the Group’s incremental borrowing rate at 1 January 2019. The Group has used the following practical expedients in applying MFRS 16 for the first time:- • Applied a single discount rate to a portfolio of leases with reasonably similar characteristics; • Applied for the exemption not to recognise operating leases with a remaining lease term of less than 12 months as at 1 January 2019; • Excluded initial direct costs for the measurement of the right-of-use asset at the date of initial application; and • Used hindsight in determining the lease term where the lease contract contains options to extend or terminate the lease. Notes To The Financial Statements (cont’d)