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Notes to the
financial statements
For the financial year ended 31 December 2018
77
A N N U A L R E P O R T
2 0 1 8
2.
Summary of significant accounting policies (cont’d)
2.3
Standards issued but not yet effective (cont’d)
Except for SFRS(I) 16, the directors expect that the adoption of the other standards above will have
no material impact on the financial statements in the year of initial application. The nature of the
impending changes in accounting policy on adoption of SFRS(I) 16 are described below:
SFRS(I) 16
Leases
SFRS(I) 16 requires lessees to recognise most leases on balance sheets. The standard includes two
recognition exemptions for lessees - leases of ‘low value’ assets and short-term leases. SFRS(I)
16 is effective for annual periods beginning on or after 1 January 2019. At commencement date of
a lease, a lessee will recognise a liability to make a lease payment (i.e. the lease liability) and an
asset representing the right to use the underlying asset during the lease term (i.e. the right-of-use
asset). Lessees will be required to separately recognise the interest expense on the lease liability
and the depreciation expense on the right-of-use asset.
The Group plans to adopt SFRS(I) 16 retrospectively with the cumulative effect of initially applying
the standard as an adjustment to the opening retained earnings at the date of initial application,
1 January 2019.
On the adoption of SFRS(I) 16, the Group expects to choose, on a lease-by-lease basis, to measure
the right-of-use asset at either:
(i)
its carrying amount as if SFRS(I) 16 had been applied since the commencement date, but
discounted using the lessee’s incremental borrowing rate as of 1 January 2019; or
(ii)
an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued
lease payments relating to that lease recognised in the statement of financial position
immediately before 1 January 2019.
In addition, the Group plans to elect the following practical expedients:
·
not to reassess whether a contract is, or contains a lease at the date of initial application
and to apply SFRS(I) 16 to all contracts that were previously identified as leases
·
to apply the exemption not to recognise right-of-use asset and lease liabilities to leases for
which the lease term ends within 12 months as of 1 January 2019
·
to apply a single discount rate to a portfolio of leases with reasonably similar characteristics
The Group has performed a preliminary impact assessment based on currently available information,
and the assessment may be subject to changes arising from ongoing analysis until the Group
adopts SFRS(I) 16 in 2019.