2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.20 Leases
(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 in which 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 2.21.
2.21 Revenue recognition
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.
Revenue from engineering services is recognised when services are rendered.
Revenue from sale of goods is recognised upon the transfer of significant risk and rewards of
ownership of the goods to the customer, usually on delivery of goods. Revenue is not recognised
to the extent where there are significant uncertainties regarding recovery of the consideration due,
associated costs or the possible return of goods.
70
NOTES TO THE
FINANCIAL STATEMENTS
For the financial year ended 31 December 2015
HG METAL MANUFACTURING LIMITED
ANNUAL REPORT 2015
