MISC Annual Report 2018

NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS HIGHLIGHTS OF THE YEAR OUR BUSINESS OUR LEADERSHIP OUR PERFORMANCE OUR COMMITMENT TO SUSTAINABILITY OUR GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 50 TH ANNUAL GENERAL MEETING 253 MISC BERHAD ANNUAL REPORT 2018 252 2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.) 2.3 Summary of significant accounting policies (cont'd.) (z) Impairment of financial assets (MFRS 139) (cont'd.) If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the income statement, the impairment loss is reversed, to the extent that the asset’s carrying amount does not exceed what the carrying amount would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in the income statement. 2.4 Pronouncements not yet in effect The following pronouncements that have been issued by the MASB will become effective in future financial reporting periods and have not been adopted by the Group and the Corporation: Effective for annual periods beginning on or after 1 January 2019 • MFRS 16: Leases • Amendments to MFRS 3: Business Combinations (Annual Improvements 2015-2017 Cycle) • Amendments to MFRS 11: Joint Arrangements (Annual Improvements 2015-2017 Cycle) • Amendments to MFRS 112: Income Taxes (Annual Improvements 2015-2017 Cycle) • Amendments to MFRS 123: Borrowing Costs (Annual Improvements 2015-2017 Cycle) • IC Interpretation 23: Uncertainty over Income Tax Treatments Effective for annual periods beginning on or after 1 January 2020 • Amendment to MFRS 3: Business Combinations (Definition of Business) • Amendments to MFRS 101: Presentation of Financial Statements (Definition of Material) • Amendments to MFRS 108: Accounting Policies, Changes in Accounting Estimates and Errors (Definition of Material) Effective for annual periods beginning on or after 1 January 2021 • MFRS 17: Insurance Contracts Effective for a date yet to be confirmed • Amendments to MFRS 10 and 128: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The Group and the Corporation are expected to apply the abovementioned pronouncements beginning from the respective dates the pronouncements become effective. The initial application of the abovementioned pronouncements is not expected to have any material impact to the financial statements of the Group and of the Corporation except as mentioned below: MFRS 16: Leases MFRS 16 replaces existing leases guidance in MFRS 117: Leases, IC Interpretation 4: Determining whether an Arrangement contains a Lease, IC Interpretation 115: Operating Leases – Incentives and IC Interpretation 127: Evaluating the Substance of Transactions Involving the Legal Form of a Lease. 2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.) 2.4 Pronouncements not yet in effect (cont'd.) MFRS 16: Leases (cont'd.) MFRS 16 introduces a single, on balance sheet lease accounting for lessees. A lessee recognises a right of use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. The lessee shall choose to measure the right of use asset at either its carrying amount as if MFRS 16 has been applied since inception or an amount equal to the lease liability. There are recognition exemptions for short-term leases, leases of low-value items and variable lease payments. Lessor accounting remains similar i.e. lessor continues to classify leases as finance or operating leases. The Group and the Corporation have assessed and estimated the financial impact on their financial statements upon initial application of MFRS 16. As allowed by the transitional provision of MFRS 16, the Group and the Corporation elect modified retrospective approach with no restatement of comparative. From the preliminary assessment of a significant portion of the arrangements, the cumulative adjustments resulting from the initial application of MFRS 16 to be recognised in retained earnings and reserves as at 1 January 2019 (date of initial application) as disclosed below: Estimated adjustments at 1 January 2019 Group RM'mil Increase in right-of-use assets 824.8 Decrease in retained earnings 93.2 Increase in lease liabilities 918.0 The Group and the Corporation are finalising the assessment of other arrangements where the final impact of adopting MFRS 16 for 1 January 2019 is expected to change accordingly.