Notes to the Financial Statements - Swissco Holdings Limited

Notes
to the Financial Statements
For the financial year ended 31 December 2009
2. Significant accounting policies (continued)
2.12 Leases
(a)
When the Group is the lessee:
Finance leases
Leases where the Group assumes substantially all risks and rewards incidental to ownership of the
leased assets are classified as finance leases.
The leased assets and the corresponding lease liabilities (net of finance charges) under finance leases
are recognised on the balance sheet as property, plant and equipment and borrowings respectively,
at the inception of the leases based on the lower of the fair value of the leased assets and the
present value of the minimum lease payments.
Each lease payment is apportioned between the finance expense and the reduction of the
outstanding lease liability. The finance expense is recognised in profit or loss on a basis that reflects
a constant periodic rate of interest on the finance lease liability.
Operating leases
Leases of assets where substantially all risks and rewards incidental to ownership are retained by
the lessors are classified as operating leases. Payments made under operating leases (net of any
incentives received from the lessor) are recognised in profit or loss on a straight-line basis over the
period of the lease.
Contingent rents are recognised as an expense in profit or loss when incurred.
(b)
When the Group is the lessor:
2.13 Inventories
The Group leases certain property, plant and equipment under operating leases to non-related
parties.
Operating leases
Leases of property, plant and equipment where the Group retains substantially all risks and rewards
incidental to ownership are classified as operating leases. Rental income from operating leases (net
of any incentives given to the lessees) is recognised in profit or loss on a straight-line basis over the
lease term.
Initial direct costs incurred by the Group in negotiating and arranging operating leases are added
to the carrying amount of the leased assets and recognised as an expense in profit or loss over the
lease term on the same basis as the lease income.
Contingent rents are recognised as income in profit or loss when earned.
Inventories are stated at the lower of cost and net realisable value. Cost is determined on a first-in, first-out
basis. Net realisable value is the estimated selling price in the ordinary course of business, less applicable
variable selling expenses.
49 Annual Report 2009 Swissco International Limited