Annual Report 2012 - ecoWise Holdings Limited

ecoWise Holdings Limitedannual report 20126931 OCTOBER 2012NOTES TO THE FINANCIAL STATEMENTS2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Leases (Continued)Finance Leases (Continued)(b)When the Group is a lessee:At the commencement of the lease term, a finance lease is recognised as an asset and as a liability inthe statement of financial position at amounts equal to the fair value of the leased asset or, if lower,the present value of the minimum lease payments, each determined at the inception of the lease.The discount rate used in calculating the present value of the minimum lease payments is the interestrate implicit in the lease, if this is impracticable to determine, the lessee’s incremental borrowing rateis used.Any initial direct costs of the lessee are added to the amount recognised as an asset. The excess ofthe lease payments over the recorded lease liability are treated as finance costs which are allocatedto each reporting year during the lease term so as to produce a constant periodic rate of interest onthe remaining balance of the liability.Contingent rents are charged as expenses in the reporting years in which they are incurred. Theassets are depreciated as owned depreciable assets.Operating LeasesLeases where the lessor effectively retains substantially all the risks and rewards of ownership of the leasedassets are classified as operating leases. For operating leases, lease payments are recognised as an expensein the profit or loss on a straight-line basis over the term of the relevant lease unless another systematicbasis is representative of the time pattern of the user’s benefit, even if the payments are not on that basis.Lease incentives received are recognised in the profit or loss as an integral part of the total lease expense.Land Use RightsLand use rights under operating leases are initially stated at cost. Following initial recognition, land use rightsare measured and carried at cost less accumulated amortisation. The land use rights are amortised on astraight-line basis over the lease term 50 years.