2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) 2.8 Leases (continued) Lessee accounting (continued) Measurement and recognition of leases as a lessee (continued) When the lease liability is remeasured, the corresponding adjustment is reflected in the ROU asset, or profit and loss if the ROU asset is already reduced to zero. The Group and the Bank have elected to account for short-term leases using the practical expedients. Instead of recognising a ROU asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term. Lessor accounting As a lessor, the Group and the Bank classifies its leases as either operating or finance leases. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of the underlying asset, and classified as an operating lease if it does not. Leases, where the Group and the Bank does not assume substantially all the risks and rewards of ownership are classified as operating leases and, the leased assets are not recognised on the statement of financial position. Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Contingent rentals are charged to profit or loss in the reporting period in which they are incurred. When the Group and the Bank are an intermediate lessor, it assesses the lease classification of a sublease with reference to the ROU asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group and the Bank apply the exemption described above, then it classifies the sublease as an operating lease. 2.9 Bills and other receivables Bills and other receivables are stated at amortised cost less any allowance for impairment. 2.10 Impairment Impairment of financial assets (i) Impairment of financial assets The Group and the Bank recognise allowance for impairment or allowance for expected credit losses “ECL” on financial assets measured at amortised cost, financial guarantee contracts, financing commitments and debt securities measured at FVOCI, but not to investments in equity instruments. ECL is recognised and measured according to two approaches, which are general approach/three stage approach or simplified approach. 290 Notes to the Financial Statements for the financial year ended 31 December 2023 Bank Islam Malaysia Berhad ◆ Integrated Annual Report 2023
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