3.
SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
3.3
Leases (cont’d)
Finance lease
A finance lease which includes hire purchase arrangement, is a lease that transfers substantially all
the risks and rewards incidental to ownership of an asset to the lessee. Title may or may not eventually
be transferred.
Minimum lease payments made under finance leases are apportioned between finance charges and
reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance
of the liability. Finance charges are recognised in finance costs in the profit or loss. 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.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable
certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated
over the shorter of the estimated useful life of the asset and the lease term.
Leasehold land and land use right which in substance is a finance lease is classified as property, plant
and equipment.
Operating Leases
Leases where the Group does not assume substantially all the risks and rewards of ownership are
classified as operating leases and, except for property interest held under operating lease, the
leased assets are not recognised on the statements of financial position. Property interest held
under an operating lease, which is held to earn rental income or for capital appreciation or both, is
classified as investment property.
Payments made under operating leases are recognised in profit or loss on a straight-line basis over
the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of
the total lease expense, over the term of the lease. Contingent rentals are charged to profit or loss
in the reporting period in which they are incurred.
Leasehold land which in substance is an operating lease is classified as prepaid land lease payments.
3.4
Intangible Assets
Research and Development
Research expenditure on internal projects is recognised as an expense when it is incurred.
Expenditure incurred on projects to develop new products is capitalised as development costs and
deferred only when the Group can demonstrate the technical feasibility of completing the asset so that
it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how
the asset will generate future economic benefits, the availability of resources to complete the project
and the ability to measure reliably the expenditure during the development. Development costs which
do not meet these criteria are recognised in profit or loss as incurred.
Capitalised development costs comprise direct attributable costs incurred for development. Capitalised
development costs, considered to have finite useful lives, are stated at cost less accumulated
amortisation and any accumulated impairment losses. Development costs are amortised using the
straight-line basis over the commercial lives of the underlying products from the commencement of
the commercialisation of the products.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2014 (CONT’D)
•
Pentamaster Corporation Berhad
(572307-U)
Annual Report 2014
51
