Year ended 31 March 2016
NOTES TO THE
FINANCIAL STATEMENTS
SINGAPORE MYANMAR INVESTCO LIMITED
| Annual Report 2016
52
3.
Significant accounting policies and other explanatory information (cont’d)
3A. Significant accounting policies (cont’d)
Leases
Whether an arrangement is, or contains, a lease, it is based on the substance of the arrangement at the
inception date, that is, whether (a) fulfilment of the arrangement is dependent on the use of a specific asset
or assets (the asset); and (b) the arrangement conveys a right to use the asset.
Leases are classified as finance leases if substantially all the risks and rewards of ownership are transferred
to the lessee. All other leases are classified as operating leases. At the commencement of the lease term,
a finance lease is recognised as an asset and as a liability in the 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 interest rate implicit in the lease, if this is practicable to determine, the
lessee’s incremental borrowing rate is used. Any initial direct costs of the lessee are added to the amount
recognised as an asset. The excess of the lease payments over the recorded lease liability are treated
as finance charges which are allocated to each reporting year during the lease term so as to produce a
constant periodic rate of interest on the remaining balance of the liability.
Contingent rents are charged as expenses in the reporting years in which they are incurred. The assets are
depreciated as owned depreciable assets. Leases where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased assets are classified as operating leases.
For operating leases, lease payments are recognised as an expense in profit or loss on a straight-line basis
over the term of the relevant lease unless another systematic basis 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 profit or loss as an integral part of the total lease expense. Rental income from operating leases is
recognised in profit or loss on a straight-line basis over the term of the relevant lease unless another
systematic basis is representative of the time pattern of the user’s benefit, even if the payments are not
on that basis. Initial direct cost incurred in negotiating and arranging an operating lease are added to the
carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
Subsidiaries
A subsidiary is an entity including unincorporated and special purpose entity that is controlled by the
reporting entity and the reporting entity is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns through its power over the investee. The
existence and effect of substantive potential voting rights that the reporting entity has the practical ability
to exercise (that is, substantive rights) are considered when assessing whether the reporting entity controls
another entity.
In the reporting entity’s separate financial statements, an investment in a subsidiary is accounted for at cost
less any allowance for impairment in value. Impairment loss recognised in profit or loss for a subsidiary is
reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount
since the last impairment loss was recognised. The carrying value and the net book value of the investment
in a subsidiary are not necessarily indicative of the amount that would be realised in a current market
exchange.
Joint ventures
A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the
net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.
Investments in joint ventures are accounted for using the equity method. They are recognised initially
at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial
statements include the Group’s share of the profit or loss and OCI of equity-accounted investees, after
adjustments to align the accounting policies with those of the Group, from the date that joint control
commences until the date that joint control ceases.
