BIMB Integrated Annual Report 2019

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.9 (i) Lessee accounting – Policy applicable after 1 January 2019 (continued) Measurement and recognition of leases as a lessee At lease commencement date, the Group and the Company recognises a right-of-use asset and a lease liability on the statement of financial position. The right-of-use asset (“ROU”) is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group and the Company, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received). The Group has elected not to separate the lease and non-lease components for property lease. The Group and the Company depreciates the ROU on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the ROU or the end of the lease term. The Group and the Company also assesses the ROU for impairment when such indicators exist. At the commencement date, the Group and the Company measures the lease liability at the present value of the lease payments unpaid at the date, discounted using the profit rate implicit in the lease if that rate is readily available or the Group and the Company incremental financing rate. Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reduced for payments made and increased for profit expense. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When the lease liability is remeasured, the corresponding adjustment is reflected in the ROU, or profit and loss if the ROU is already reduced to zero. The Group and the Company has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a ROU and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term. (ii) Lessor accounting – Policy applicable after 1 January 2019 The Group and the Company’s accounting policy under MFRS 16 has not changed from the comparative period. As a lessor, the Group and the Company classifies its leases as either operating or finance leases. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of the underlying asset, and classified as an operating lease if it does not. Leases in terms of which the Group and the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to the asset. Minimum leased payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of return on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 (CONTINUED) 196 Integrated Annual Report 2019 Group Overview Sustaining The Group Management Discussion & Analysis Group Governance