notes to the financial statements - Investor Relations

CWT Limited
64
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2011
3 SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
3.4 Leases
When entities within the Group are lessors of a finance lease
Amounts due from lessees under finance leases are recorded as receivables at the amount of the Group’s net investment in
the leases. Finance lease income is allocated to accounting periods so as to reflect a constant rate of return on the Group’s
net investment outstanding in respect of the leases.
When entities within the Group are lessees of a finance lease
Leased assets in which the Group assumes substantially all the risks and rewards of ownership are classified as finance
leases. Upon initial recognition, property, plant and equipment acquired through finance leases are capitalised at the lower of
its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted
for in accordance with the accounting policy applicable to that asset. Leased assets are depreciated over the shorter of
the lease term and their useful lives. Lease payments are apportioned between finance expense and reduction of the lease
liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of
interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease
payments over the remaining term of the lease when the lease adjustment is confirmed.
When the entities within the Group are lessors of an operating lease
Assets subject to operating leases are included in leasehold buildings and are stated at cost less accumulated depreciation
and impairment losses. Rental income (net of any incentives given to lessees) is recognised on a straight-line basis over the
lease term.
When the entities within the Group are lessees of an operating lease
Where the Group has the use of assets under operating leases, payments made under the leases are recognised in profit or
loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral
part of the total lease.
Sale and leaseback transactions
In a sale and leaseback of an asset, the excess of the sale proceeds over the carrying amount of the asset is recognised
immediately in income except where the transaction results in a finance lease or where the sale price is above the fair value
of asset leased back in an operating lease. Where the sale and leaseback results in a finance lease, the excess of the sale
proceeds over the carrying amount of the asset is deferred and amortised over the term of the finance lease. Where the sale
proceeds is in excess of the fair value of an asset sold and leased back in an operating lease, the excess of the sale proceeds
over the fair value of the asset is deferred and amortised over the period for which the asset is expected to be used.
If the sale results in a loss, the loss is recognised immediately except where the sale price is below fair value which is
compensated by future lease payments at below market price; in which case, the difference is deferred and amortised over
the period the asset is expected to be used.