56
SUNMOON FOOD COMPANY LIMITED
ANNUAL REPORT 2015
NOTES TO THE
FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
2.18 Leases
When the Group is the lessee of an operating lease
Leases of assets in which a significant portion of the risks and rewards of ownership are retained by the
lessor 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.
When an operating lease is terminated before the lease period has expired, any payment required to be
made to the lessor by way of penalty is recognised as an expense in the financial year in which termination
takes place.
When the Group is the lessor of an operating lease
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 a straight-line basis. The
aggregate costs of incentives provided to leases are recognised as a reduction of income over the lease
term on a straight-line basis.
When the Group is the lessee of a finance lease
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks
and rewards incidental to ownership of the leased assets to the lessee. All other leases are classified as
operating leases.
Assets held under finance leases are capitalised as property, plant and equipment of the Group at their
fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments.
The corresponding liability to the lessor is included in the statement of financial position as a finance lease
obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation
so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are
charged to profit or loss, unless they are directly attributable to the acquisition, construction of production
of qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on
borrowing costs.
