Al-`Aqar Healthcare REIT Annual Report 2019

Al-`Aqar Healthcare REIT 06 FINANCIAL STATEMENT 127 Notes To The Financial Statements For The Financial Year Ended 31 December 2019 (Continued) 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.7 Provisions Provisions are recognised when the Group or the Fund has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. 3.8 Leases The Group and the Fund have adopted MFRS 16 Leases from 1 January 2019. MFRS 16 introduces significant changes to the lessee accounting by removing the distinction between operating and finance lease requires and requiring the recognition of a right- of-use asset and a lease liability at commencement for all leases, except for short-term leases and leases of low value assets. In contrast to lessee accounting, the requirements for lessor accounting have remained largely unchanged. As lessor Leases where the Group or the Fund retains 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 bases as rental income. 3.9 Revenue The Group’s and the Fund’s revenue from contracts with customers are recognised by reference to each distinct performance obligation in the contract with customer in according to the MFRS 15 “Revenue from Contracts with Customers”. A contract with customer exists when the contract has commercial substance, the Group, the Fund and their customers have approved the contract and intend to perform their respective obligations, the Group’s, the Fund’s and the customer’s rights regarding the goods or services to be transferred and the payment terms can be identified, and it is probable that the Group and the Fund will collect the consideration to which it will be entitled to in exchange of those goods or services. Revenue from contracts with customers is measured at its transaction price, being the amount of consideration which the Group and the Fund expect to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties such as sales and service taxes or goods and service tax. If the amount of consideration varies due to discounts, rebates, penalties or other similar items, the Group and the Fund estimate the amount of consideration that it expects to be entitled based on the expected value method or the most likely outcome but the estimation is constrained up to the amount that is highly probable of no significant reversal in the future. Transaction price is allocated to each performance obligation on the basis of the relative standalone selling prices of