Eng - IOI Group

Notes To The Financial Statements cont’d5. SIGNIFICANT ACCOUNTING POLICIES cont’d5.6 Leases cont’d5.6.1 Operating lease - the Group as LesseeLeases of assets under which all the risks and rewards incidental to ownership are retained by the lessor are classified asoperating leases. Payments made under operating leases are charged to the income statement on a straight-line basisover the period of the lease.5.6.2 Lease of land and buildingThe minimum lease payments including lump-sum upfront payments made to acquire the interest in the land and building,are allocated between land and building elements in proportion to the relative fair values of the leasehold interest in theland element and the building element at the inception of the lease.The lump-sum upfront lease payments made represent prepaid lease payments and are amortised over the lease term ona straight-line basis except for leasehold land that is classified as an investment property or an asset held under propertydevelopment.For leases of land and building in which the amount that would initially be recognised for land element is immaterial, theland and building is treated as a single unit for the purpose of lease classification and is accordingly classified as a financeor operating lease. In such a case, the economic life of the buildings is regarded as the economic life of the entire leasedasset.5.7 Property Development Activities5.7.1 Land held for property developmentLand held for property development consists of land where no development activities have been carried out or wheredevelopment activities are not expected to be completed within the normal operating cycle. Such land is classified withinnon-current assets and is stated at cost less any accumulated impairment losses.Land held for property development is reclassified as property development costs at the point when development activitieshave commenced and where it can be demonstrated that the development activities can be completed within the normaloperating cycle.5.7.2 Property development costProperty development costs comprise costs associated with the acquisition of land and all costs that are directly attributableto development activities or that can be allocated on a reasonable basis to such activities.Property development costs not recognised as an expense is recognised as an asset and is stated at the lower of cost andnet realisable value.The excess of revenue recognised in the income statement over billings to purchasers is shown as accrued billings undertrade and other receivables and the excess of billings to purchasers over revenue recognised in the income statement isshown as progress billings under trade and other payables.153ANNUAL REPORT 2007IOI Corporation Berhad