Kimlun Corporation Berhad Annual Report 2018

2. Summary of significant accounting policies (cont'd) 2.2 Standards, IC interpretation, Amendments and Annual Improvements issued but not yet effective (cont'd) The directors are of opinion that the Standards, Amendments, Annual Improvement and IC Interpretations above will not have any material impact on the financial statement in the year of initial adoption other than as discussed below: MFRS 16 Leases MFRS 16 will replace MFRS 117 Leases, IC Interpretation 4 Determining whether an Arrangement contains a Lease, IC Interpretation 115 Operating Lease-Incentives and IC Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. MFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under MFRS 117. At the commencement date of a lease, a lessee will recognise a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions), less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease liability is initially measured at present value of the lease payments that are not paid at that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications. Classification of cash flows will also be affected as operating lease payments under MFRS 117 are presented as operating cash flows, whereas under MFRS 16, the lease payments will be split into a principal (which will be presented as financing cash flows) and an interest portion (which will be presented as operating cash flows). Lessor accounting under MFRS 16 is substantially the same as the accounting under MFRS 117. Lessors will continue to classify all leases using the same classification principle as in MFRS 117 and distinguish between two types of leases: operating and finance leases. MFRS 16 also requires lessees and lessors to make more extensive disclosures than under MFRS 117. MFRS 16 is effective for annual periods beginning on or after 1 January 2019. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The Group plans to adopt MFRS 16 using modified retrospective approach. The initial application of MFRS 16 is expected to increase the assets and liabilities of the Group as the Group will recognise right-of use assets and lease liabilities for leases previously classified as operating leases. 2.3 Current versus non-current classification Assets and liabilities in the statements of financial position are presented based on current/non-current classification. An asset is current when it is: • Expected to be realised or intended to be sold or consumed in normal operating cycle; • Held primarily for the purpose of trading; • Expected to be realised within twelve months after the reporting period; or • Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. A liability is current when: • It is expected to be settled in normal operating cycle; • It is held primarily for the purpose of trading; • It is due to be settled within twelve months after the reporting period; or • There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities. Annual Report 2018 74 For the financial year ended 31 December 2018 (cont’d) NOTES TO THE FINANCIAL STATEMENTS