Connecting the nation. and Beyond. - ChartNexus

178 / MRCB annual report 2011 /
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.8 LEASES
Finance Lease
Leases of property, plant and equipment where the Group and the Company assume substantially all the benefits and
risks of ownership are classified as finance leases.
Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property and the
present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges
so as to achieve a periodic constant rate of interest on the balance outstanding. The corresponding rental obligations, net
of finance charges, are included in borrowings. The interest element of the finance charges is charged to the profit or loss
over the lease period.
The Directors have applied the transitional provisions issued by the Malaysian Accounting Standards Board on adoption of
FRS 117 “Leases” which allows the prepaid lease payments to be stated at its previous year’s valuation less amortisation.
Accordingly, the valuation has not been updated.
Leasehold land are amortised over the period of the respective leases ranging from 66 years to 99 years. Amortisation is
computed on the straight-line method to write off the cost of each asset over its estimated useful life. The principal annual
depreciation rate for related building is 2% per annum.
Property, plant and equipment acquired under finance leases are depreciated over the shorter of the estimated useful life
of the assets and the lease term.
Operating Lease
Leases of assets where a significant portion of the risk and rewards of ownership are retained by the lessor are classified
as operating leases. Payments made under operating leases (net of any incentives from the lessor) are charged to the
profit or loss on the straight-line basis over the lease period.
2.9 PROPERTY DEVELOPMENT ACTIVITIES
(a) Land held for property development
Land held for property development consists of land or such portion thereof on which no significant development work
has been undertaken or where development activities is not expected to be completed within the normal operating
cycle. Such land is classified as non-current asset and is stated at cost less accumulated impairment losses.
Cost associated with the acquisition of land includes the purchase price of the land, professional fees, stamp duties,
commissions, conversion fees and other relevant levies. Where the Group and the Company had previously recorded
the land at revalued amount, it continues to retain this amount as its surrogate cost as allowed by FRS 2012004 “Property
Development Activities”. Where an indication of impairment exists, the carrying amount of the asset is assessed and
written down immediately to its recoverable amount. Refer to accounting policy on impairment of non-financial assets
as set out in Note 2.21 to the financial statements.
Land held for property development is transferred to property development costs (under current assets) (Note 2.9(b))
when development activities have commenced and can be completed within the Group’s and the Company’s normal
development cycle.
Borrowing costs are capitalised in accordance with Note 2.22 to the financial statements.