Page 121 - S P Setia Annual Report 2016
P. 121

S P Setia Berhad Group                                                                                119
          Annual Report 2016

                                                                               Notes To The Financial Statements

                                                                                  For The Financial Year Ended 31 December 2016

              (k)  Leases

                   A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments for the right to
                   use an asset for an agreed period of time.

                   (i)   Finance lease

                       A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset. Title may
                       or may not eventually be transferred.

                       Property, plant and equipment acquired by way of finance leases are stated at amounts equal to the lower of their fair values
                       and the present value of minimum lease payments at the inception of the leases, less accumulated depreciation and any
                       impairment losses.

                       In calculating the present value of the minimum lease payments, the discount rate is the interest rate implicit in the lease,
                       if this is determinable; if not, the Group’s incremental borrowing rate is used.

                   (ii)   Operating lease

                       An operating lease is a lease other than a finance lease.

                       Operating lease income or operating lease rentals are credited or charged to profit or loss on a straight-line basis over the
                       period of the lease.
              (l)   Development properties

                   Development properties are classified under three categories, i.e. land held for property development, property development
                   costs and development rights.

                   (i)   Land Held for Property Development

                       Land held for property development is defined as land on which development is not expected to be completed within the
                       normal operating cycle. Usually, no significant development work would have been undertaken on these lands other than
                       infrastructure work, earth work and landscape work incurred to put the land ready for development. Accordingly, land held
                       for property development is classified as non-current assets on the statement of financial position and is stated at cost plus
                       incidental expenditure incurred to put the land in a condition ready for development.

                   (ii)   Property Development Costs

                       Land on which development has commenced and is expected to be completed within the normal operating cycle is
                       included in property development costs. Property development costs comprise all costs that are directly attributable to
                       development activities or that can be allocated on a reasonable basis to such activities.

                       Where the outcome of a development can be reasonably estimated, revenue is recognised on the percentage of completion
                       method. The stage of completion is determined by the proportion that costs incurred to-date bear to the estimated total
                       costs. In applying this method of determining stage of completion, only those costs that reflect actual development work
                       performed are included as costs incurred.
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