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LIPPO MALLS INDONESIA RETAIL TRUST ANNUAL REPORT 2014
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Leases
Whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date,
that is, whether (a) fulfilment of the arrangement is dependent on the use of a specific asset or assets (the asset);
and (b) the arrangement conveys a right to use the asset. Leases are classified as finance leases if substantially all
the risks and rewards of ownership are transferred to the lessee. All other leases are classified as operating leases.
At the commencement of the lease term, a finance lease is recognised as an asset and as a liability in the statement of
financial position at amounts equal to the fair value of the leased asset or, if lower, the present value of the minimum
lease payments, each determined at the inception of the lease. The discount rate used in calculating the present value
of the minimum lease payments is the interest rate implicit in the lease, if this is practicable to determine; if not, the
lessee’s incremental borrowing rate is used. Any initial direct costs of the lessee are added to the amount recognised
as an asset. The excess of the lease payments over the recorded lease liability are treated as finance charges which are
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 rents are charged as expenses in the periods in which they are incurred. The assets
are depreciated as owned depreciable assets. Leases where the lessor effectively retains substantially all the risks and
benefits of ownership of the leased assets are classified as operating leases. For operating leases, lease payments are
recognised as an expense in the profit or loss on a straight-line basis over the term of the relevant lease unless another
systematic basis is representative of the time pattern of the user’s benefit, even if the payments are not on that basis.
Rental income from operating leases is recognised in the profit or loss on a straight-line basis over the term of the
relevant lease unless another systematic basis is representative of the time pattern of the user’s benefit, even if the
payments are not on that basis. Initial direct cost incurred in negotiating and arranging an operating lease are added
to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term. Contingent
rents receivable are recognised in the periods in which they occur.
Intangible asset
Intangible asset, which relates to the rental guaranteed payments from certain master lease agreements, is measured
initially at cost, being the fair value as at the date of acquisition. Following the initial recognition, intangible asset is
measured at cost less any accumulated amortisation and any impairment losses. Intangible assets with finite useful
lives are amortised over the estimated useful lives and assessed for impairment whenever there is an indication that
the intangible asset may be impaired. The amortisation period and amortisation method are reviewed at each financial
year-end.
The amortisable amount of an intangible asset with finite useful life is allocated on a systematic basis over the best
estimate of its useful life from the point at which the asset is ready for use.
The useful live is as follows:
Rental guaranteed payment – Over the guarantee period, which is, 33%.
Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in profit and loss when the asset is derecognised.
Notes to the Financial Statements
(Cont’d)
31 December 2014
