Yinson Annual Report 2020

218 Notes to the financial statements (cont’d) For the financial year ended 31 January 2020 Yinson Holdings Berhad SECTION 7 ACCOUNTABILITY 2. Summary of significant accounting policies (continued) 2.13 Leases (continued) (a) Accounting by lessee (continued) Accounting policies applied from 1 February 2019 (continued) Lease liabilities Lease liabilities are initially measured at the present value of the lease payments that are not paid at that date. The lease payments include the following: - Fixed payments (including in-substance fixed payments), less any lease incentive receivable; - Variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the commencement date; - Amounts expected to be payable by the Group under residual value guarantees; - The exercise price of a purchase and extension options if the Group is reasonably certain to exercise that option; and - Payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option. Lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used. This is the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the ROU in a similar economic environment with similar term, security and conditions. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Variable lease payments that are not based on an index or rate are recognised in profit or loss in the period in which the condition that triggers those payments occurs. Lease liabilities are presented as a separate line item in the statements of financial position of the Group and the Company. Interest expense on the lease liability is presented within finance cost in profit or loss. Reassessment of lease liabilities The Group is also exposed to potential future increases in variable lease payments that depend on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is remeasured and adjusted against the ROU assets. Short-term leases and leases of low-value assets Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise small items of office furniture. Payments associated with short-term leases of vehicles and properties and all leases of low-value assets are recognised on a straight-line basis over the lease term as an expense in profit or loss.