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Notes to The Financial Statements (cont’d)
2. SUMMARy of SIGNIfICANT ACCoUNTING polICIES (CoNT’D)
2.3 Significant Accounting policies (cont’d)
2.3.17 financial liabilities (cont’d)
(ii) Other financial liabilities (cont’d)
For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are
derecognised, and through the amortisation process.
A financial liability is derecognised when the obligation under the liability is extinguished. When an existing
financial liability is replaced by another from the same lender on substantially different terms, or the
terms of an existing liability are substantially modified, such an exchange or modification is treated as a
derecognition of a new liability, and the difference in the respective carrying amounts is recognised in profit
or loss.
2.3.18 financial Guarantee Contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse
the holder for a loss it incurs because of a specified debtor fails to make payment when due.
Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction costs.
Subsequent to initial recognition, financial guarantee contracts are recognised as income in profit or loss
over the period of the guarantee. If the debtor fails to make payment relating to financial guarantee contract
when it is due and the Group as issuer, is required to reimburse the holder for the associated loss, the liability
is measured at the higher of the best estimate of the expenditure required to settle the present obligation at
the end of the reporting period and the amount initially recognised less cumulative amortisation.
2.3.19 leases
Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of
their fair values and the present value of the minimum lease payments at the inception of the leases, less
accumulated depreciation and impairment losses. The corresponding liability is included in the statement
of financial position as borrowings. In calculating the present value of the minimum lease payments, the
discount factor used is the interest rate implicit in the lease, when it is practicable to determine; otherwise,
the Group’s incremental borrowing rate is used. Any initial direct costs are also added to the carrying amount
of such assets.
Lease payments are apportioned between the finance costs and the reduction of the outstanding liability.
Finance costs, which represent the difference between the total leasing commitments and the fair value
of the assets acquired, are recognised as an expense in profit or loss over the term of the relevant lease
so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each
accounting period.
The depreciation policy for leased assets is in accordance with that for depreciable property, plant and
equipment.
2.3.20 provisions for liabilities
Provisions are recognised when the Group has a present obligation as a result of a past event, it is probable
that an outflow of economic resources will be required to settle the obligation and the amount of the
obligation can be estimated reliably.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate.
If it is no longer that an outflow of economic resources will be required to settle the obligation, the provision
is reversed. If the effect of the time value of money is material, provisions are discounted using a current
pre-tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the
increase in the provision due to the passage of time is recognised as finance cost.
56 MITRAJAYA HOLDINGS BERHAD ANNUAL REPORT 2011