Fraser & Neave Holdings Bhd Annual Report 2020

220 FRASER & NEAVE HOLDINGS BHD 196101000155 (4205-V) Notes to The Financial Statements (Cont’d.) 34. SIGNIFICANT CHANGES IN ACCOUNTING POLICIES During the year, the Group adopted MFRS 16. DEFINITION OF A LEASE On transition to MFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases. It applied MFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under MFRS 117 and IC Interpretation 4, Determining whether an Arrangement contains a Lease were not reassessed. Therefore, the definition of a lease under MFRS 16 has been applied only to contracts entered into or changed on or after 1 October 2019. AS A LESSEE Where the Group is a lessee, the Group applied the requirements of MFRS 16 using modified retrospective approach with the initial application that the right-of-use assets are equivalent to the lease liabilities as at 1 October 2019. At 1 October 2019, for leases that were classified as operating lease under MFRS 117, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group entities’ incremental borrowing rate as at 1 October 2019. The weighted-average rate applied is 3.67%. Right-of-use assets are measured at either: – their carrying amount as if MFRS 16 had been applied since the commencement date, discounted using the lessee’s incremental borrowing rate at 1 October 2019; or – an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments. The Group used the following practical expedients when applying MFRS 16 to leases previously classified as operating lease under MFRS 117: – applied a single discount rate to a portfolio of leases with similar characteristics; – applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term as at 1 October 2019; – excluded initial direct costs from measuring the right-of-use asset at the date of initial application; and – used hindsight when determining the lease term if the contract contains options to extend or terminate the lease. For leases that were classified as finance lease under MFRS 117, the carrying amounts of the right-of-use asset and the lease liability at 1 October 2019 are determined to be the same as the carrying amount of the leased asset and lease liability under MFRS 117 immediately before that date. AS A LESSOR Group entities who is an intermediate lessor reassessed the classification of a sublease previously classified as an operating lease under MFRS 117 and concluded that the sublease is an operating lease under MFRS 16.