Kimlun Corporation Berhad Annual Report 2019

Annual Report 2019 Kimlun Corporation Berhad NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 (cont’d) 84 2. Summary of significant accounting policies (cont'd) 2.2 Changes in accounting policies (cont'd) MFRS 16 Leases (cont'd) The Group also applied the available practical expedients wherein it: - - - - - Based on the above, as at 1 January 2019: (a) (b) (c) Group RM Operating lease commitments as at 31 December 2018 6,347,026 Less: Low-value leases recognised on a straight-line basis as expense (245,823) Operating lease commitments as at 31 December 2018 (Adjusted) 6,101,203 Weighted average incremental borrowing rate as at 1 January 2019 5.87% Discounted operating lease commitments as at 1 January 2019 5,270,412 Add: Extension options reasonably certain to be exercised 4,558,247 Lease liabilities recognised as at 1 January 2019 9,828,659 Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application; and Used hindsight in determining the lease term where the contract contained options to extend or terminate the lease. The Group's right-of-use assets represents rental of land, buildings, machinery and equipment, which were recognised as at 1 January 2019. Subsequent to initial recognition, the right-of-use assets is measured at cost less any accumulated depreciation, accumulated impairment losses and adjusted for any remeasurement of lease liabilities. The lease liabilities arising from the rental of land, buildings, machinery and equipment are recognised and discounted using the Group's average incremental borrowing rate of 5.87% at initial recognition at 1 January 2019. Subsequent to initial recognition, the Group measures the lease liabilities by reducing the carrying amount to reflect lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications using the Group's incremental borrowing rate at that time. The lease liabilities as at 1 January 2019 can be reconciled to the operating lease commitments as of 31 December 2018, as follows: The cumulative effect of adoption of MFRS 16 Leases is recognised at the date of initial application as an adjustment to the opening balance of retained earnings as at 1 January 2019. Used a single discount rate to a portfolio of leases with reasonably similar characteristics; Relied on its assessment of whether leases are onerous immediately before the date of initial application; Applied the short-term leases exemptions to leases with lease term that ends within 12 months of the date of initial application;