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Notes to the Financial Statements
For the fnancial year ended 31 December 2012
3. Summary of significant accounting policies (cont’d)
3.24 Leases (cont’d)
(b) As lessor
Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classifed as operating
leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset
and recognised over the lease term on the same bases as rental income. The accounting policy for rental income is set out
in Note 3.25(c).
(c) Prepaid land premiums and land use rights
From 1 January 2010
Land leases are considered fnance leases since the arrangements transfer the substantial risks and rewards incidental to
ownership of the land. As such, land leases are presented as part of property, plant and equipment.
Included as part of the land leases are the costs associated with the legal transfer or renewal of land right title, such as legal
fees, land survey and re-measurement fees, taxes and other related expenses.
Land use rights are initially measured at cost. Following initial recognition, land use rights are measured at cost less accumulated
amortisation. The land use rights are amortised on a straight-line basis over the lease term ranging from 8 to 48 years.
3.25 Revenue
Revenue is recognised to the extent that it is probable that the economic benefts will fow to the Group and the revenue can be
reliably measured, regardless of when the payment is made. Revenue is measured at the fair value of consideration received or
receivable, taking into account contractually defned terms of payment and excluding taxes or duty. The Group assesses its revenue
arrangements to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its
revenue arrangements. The following specifc recognition criteria must also be met before revenue is recognised:
(a) Sale of goods
Revenue from sales arising from physical delivery of CPO, Palm Kernel (“PK”), palm-based products, copra-based products,
edible oils and other agricultural products is recognised when signifcant risks and rewards of ownership of goods are
transferred to the buyer, which generally coincide with their delivery and acceptance.
(b) Interest income
Interest income is recognised using the effective interest method, unless collectability is in doubt.
(c) Rental and storage income
Rental and storage income is recognised on a straight-line basis over the lease terms on an ongoing basis.
(d) Dividend income
Dividend income is recognised when the right to receive payment is established.
Indofood Agri Resources Ltd. • Annual Report 2012 83