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annual report | 2012 Gunung Capital Berhad (330171-P)<br />
60<br />
NOTES TO THE FINANCIAL STATEMENTS (cont’d)<br />
31 DECEMBER 2012<br />
2 SIGNIFICANT ACCOUNTING POLICIES (cont’d)<br />
2.4 Summary of Significant Accounting Policies (cont’d)<br />
(j) Financial Guarantee Contracts<br />
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse<br />
the holder for a loss it incurs because a specified debtor fails to make payment when due.<br />
Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction costs.<br />
Subsequent to initial recognition, financial guarantee contracts are recognised as income in profit or loss<br />
over the period of the guarantee. If the debtor fails to make payment relating to financial guarantee<br />
contract when it is due and the Group and the Company, as issuer, is required to reimburse the holder for<br />
the associated loss, the liability is measured at the higher of the best estimate of the expenditure required<br />
to settle the present obligation at the end of the reporting period and the amount initially recognised less<br />
cumulative amortisation.<br />
(k) Provisions<br />
Provisions for liabilities are recognised when the Group and the Company have a present legal or constructive<br />
obligation as a result of past events, when it is probable that an outflow of resources embodying economic<br />
benefits will be required to settle the obligation, and when a reliable estimate of the amount can be made.<br />
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where<br />
the effect of the time value of money is material, the amount of a provision is the present value of the<br />
expenditure expected to be required to settle the obligation.<br />
(l) Leases<br />
i) As lessee<br />
Finance leases, which transfer to the Company substantially all the risks and rewards incidental to<br />
ownership of the leased item, are capitalised at the inception of the lease at fair value of the lease asset<br />
or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added<br />
to the amount capitalised. Lease payments are apportioned between the finance charges and reduction<br />
of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability.<br />
Finance charges are charged to the profit or loss.<br />
Contingent rents, if any, are charged as expenses in the periods in which they are incurred.<br />
Leased assets are depreciated over the estimated useful lives of the assets concerned. However, if there<br />
is no reasonable certainty that the Group will obtain ownership at the end of the lease term, the asset<br />
is depreciated over the shorter of the estimated useful life and the lease term.<br />
Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the<br />
lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of<br />
rental expense over the lease term on a straight-line basis.<br />
ii) As lessor<br />
Leases where the Group retains substantially all the risks and rewards of ownership of the asset are<br />
classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added<br />
to the carrying amount of the leased asset and recognised over the lease term on the bases as rental<br />
income. The accounting policy for rental income is set out in Note 2(t)(iii).