88.
INDOFOOD AGRI RESOURCES LTD
ANNUAL REPORT 2015
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For the financial year ended 31 December 2015
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.23 Leases (cont’d)
(a)
As lessee
Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of
the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower,
at the present value of the minimum lease payments. Any initial direct costs are also added to the amount
capitalised. Lease payments are apportioned between the 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 charged to
profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease
term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.
Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease
term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense
over the lease term on a straight-line basis.
(b)
As lessor
Leases where the Group does not transfer substantially all the risks and rewards of ownership of the asset are
classified 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 2.24(c).
(c)
Land use rights
Land leases are considered finance 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 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 40 years.
2.24 Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow 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 defined 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 following
specific 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 significant 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.
