2019 UEM Edgenta Annual Report

156 Notes to the Financial Statements For the year ended 31 December 2019 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.2 Changes in accounting policies (cont’d.) MFRS 16 Leases (cont’d.) Upon adoption of MFRS 16, the Group applied a single recognition and measurement approach for all leases except for short-term leases and leases of low-value assets. Refer to Note 2.4(q) for the accounting policy beginning 1 January 2019. The standard provides specific transition requirements and practical expedients, which have been applied by the Group. a. Leases previously classified as finance leases The Group did not change the initial carrying amounts of recognised assets and liabilities at the date of initial application for leases previously classified as finance leases (i.e. the right-of-use assets and lease liabilities equal the lease assets and liabilities recognised under MFRS 117). The requirements of MFRS 16 were applied to these leases from 1 January 2019. b. Leases previously accounted for as operating leases The Group recognised right-of-use assets and lease liabilities for those leases previously classified as operating leases, except for short-term leases and leases of low-value assets. The right-of-use assets were recognised based on the amount equal to the lease liabilities, adjusted for any related prepaid and accrued lease payments previously recognised. Lease liabilities were recognised based on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application. The Group also applied the available practical expedients wherein it: - Used a single discount rate to a portfolio of leases with reasonably similar characteristics; - Relied on its assessment of whether leases are onerous immediately before the date of initial application; - Applied the short-term leases exemptions to leases with lease term that ends within 12 months of the date of initial application; - Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application; and - Used hindsight in determining the lease term where the contract contained options to extend or terminate the lease.