2019 UEM Edgenta Annual Report

156 157 UEM EDGENTA AT A GLANCE MESSAGE FROM OUR LEADERSHIP STRATEGIC FOCUS OPERATIONAL REVIEW SUSTAINABILITY EFFORTS CORPORATE GOVERNANCE INTRODUCTION FINANCIAL REVIEW ADDITIONAL INFORMATION Notes to the Financial Statements For the year ended 31 December 2019 Notes to the Financial Statements For the year ended 31 December 2019 UEM Edgenta Berhad Annual Report 2019 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.2 Changes in accounting policies (cont’d.) MFRS 16 Leases (cont’d.) Upon adoption of MFRS 16, the Group applied a single recognition and measurement approach for all leases except for short-term leases and leases of low-value assets. Refer to Note 2.4(q) for the accounting policy beginning 1 January 2019. The standard provides specific transition requirements and practical expedients, which have been applied by the Group. a. Leases previously classified as finance leases The Group did not change the initial carrying amounts of recognised assets and liabilities at the date of initial application for leases previously classified as finance leases (i.e. the right-of-use assets and lease liabilities equal the lease assets and liabilities recognised under MFRS 117). The requirements of MFRS 16 were applied to these leases from 1 January 2019. b. Leases previously accounted for as operating leases The Group recognised right-of-use assets and lease liabilities for those leases previously classified as operating leases, except for short-term leases and leases of low-value assets. The right-of-use assets were recognised based on the amount equal to the lease liabilities, adjusted for any related prepaid and accrued lease payments previously recognised. Lease liabilities were recognised based on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application. The Group also applied the available practical expedients wherein it: - 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; - 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. 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.2 Changes in accounting policies (cont’d.) MFRS 16 Leases (cont’d.) b. Leases previously accounted for as operating leases (cont’d.) Based on the above, as at 1 January 2019: - Right-of-use assets of RM38,080,000 and RM31,751,000 were recognised and presented separately by the Group and the Company in the statements of financial position. - Lease liabilities of RM35,151,000 and RM28,686,000 were recognised and presented separately by the Group and the Company in the statements of financial position. The lease liabilities as at 1 January 2019 can be reconciled to the operating lease commitments as of 31 December 2019, as follows: Group RM’000 Company RM’000 Operating lease obligations as at 31 December 2018 10,342 1,210 Reasonably certain extension options 26,273 30,200 Relief option for short term leases (1,021) - Relief option for leases of low value assets (712) (361) Gross liabilities at 1 January 2019 34,882 31,049 Effect from discounting (Note A) (2,858) (2,363) Reclassification of finance lease liabilities 3,127 - Lease liabilities due to initial application of MFRS 16 35,151 28,686 Note A Discounted based on the weighted average incremental borrowing rate as at 1 January 2019 of 4.15% 2.3 Standards issued but not yet effective The standards and interpretation that are issued but not yet effective up to the date of issuance of the Group’s and the Company’s financial statements are disclosed below. The Group and the Company intend to adopt these standards and interpretation, if applicable, when they become effective. Effective for annual periods beginning on or after Amendments to MFRS 9, MFRS 139 and MFRS 7: Interest Rate Benchmark 1 January 2020 Amendments to MFRS 3: Definition of a Business 1 January 2020 Amendments to MFRS 101 and 108: Definition of Material 1 January 2020 Revised Conceptual Framework for Financial Reporting (The Conceptual Framework) 1 January 2020 MFRS 17: Insurance Contracts 1 January 2021 Amendments to MFRS 10 and MFRS 128: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture Deferred These standards and interpretations are not expected to have a significant impact on the financial statements in the period of initial application apart from the changes to disclosures and presentation.