Annual Report 2012 - IOI Group

5. SIGNIFICANT ACCOUNTING POLICIES (Continued)5.6 Leases (Continued)5.6.3 Lease of land and buildingThe minimum lease payments including lump-sum upfront payments made to acquire the interest in the land andbuilding are allocated between land and building elements in proportion to the relative fair values of the leaseholdinterests in the land element and the buildings element at the inception of the lease.The lump-sum upfront lease payments made represent prepaid lease payments and are amortised over the lease termon a straight-line basis, except for leasehold land that is classified as an investment property or an asset held underproperty development.For leases of land and buildings in which the amount that would initially be recognised for the land element isimmaterial, the land and buildings are treated as a single unit for the purpose of lease classification and is accordinglyclassified as a finance or operating lease. In such a case, the economic life of the building is regarded as the economiclife of the entire leased asset.Leasehold land which in substance is a finance lease is classified as property, plant and equipment.5.7 Property Development Activities5.7.1 Land held for property developmentLand held for property development consists of land where no significant development activity have been carried outor where development activities are not expected to be completed within the normal operating cycle. Such land isclassified within non-current assets and is stated at cost less any accumulated impairment losses.Cost associated with the acquisition of land includes the purchase price of the land, professional fees, stamp duty,commission, conversion fees and other relevant levies.Land held for property development is reclassified as property development costs at the point when developmentactivities have commenced and where it can be demonstrated that the development activities can be completedwithin the normal operating cycle.5.7.2 Property development costsProperty development costs comprise costs associated with the acquisition of land and all costs that are directlyattributable to development activities or that can be allocated on a reasonable basis to such activities. They comprise thecost of land under development, construction costs and other related development costs common to the whole project.Property development costs not recognised as an expense is recognised as an asset and is measured at the lower ofcost and net realisable value.The excess of revenue recognised in profit or loss over billings to purchasers is shown as accrued billings under tradeand other receivables and the excess of billings to purchasers over revenue recognised in profit or loss is shown asprogress billings under trade and other payables.Annual Report 2012IOI CORPORATION BERHAD 139