EXCEL FORCE MSC BERHAD Annual Report 2020

EXCEL FORCE MSC BERHAD - ANNUAL REPORT 2020 68 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2020 (CONT’D) 3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (d) Leases (a) As lessee The Group and the Company recognise a ROU asset and a lease liability at the lease commencement date. The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or site on which it is located, less any lease incentives received. The ROU asset is subsequentlymeasured at cost less any accumulated depreciation, accumulated impairment loss and, if applicable, adjusted for any remeasurement of lease liabilities. The policy of recognition and measurement of impairment losses is in accordance with Note 3(k)(i) on impairment of non-financial assets. The ROU asset under cost model is depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the ROU asset or the end of the lease term. The estimated useful lives of the ROU assets are determined on the same basis as those of property, plant and equipment as follows: Leasehold building Over the remaining lease period Office spaces Over the lease term Computer equipment Over the lease term Capital work-in-progress consists of leasehold buildings under construction for intended use as office. The amount is stated at cost until the right-of-use asset is ready for their intended use. The ROU assets are subject to impairment. The lease liability is initially measured at the present value of future lease payments at the commencement date, discounted using the respective Group entities’ incremental borrowing rates. Lease payments included in the measurement of the lease liability include fixed payments, any variable lease payments, amount expected to be payable under a residual value guarantee, and exercise price under an extension option that the Group and the Company are reasonably certain to exercise. Variable lease payments that do not depend on an index or a rate and are dependent on a future activity are recognised as expenses in profit or loss in the period in which the event or condition that triggers the payment occurs. The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising froma change in rate, or if the Group or the Company changes its assessment of whether it will exercise an extension or termination option. Lease payments associated with short-term leases and leases of low value assets are recognised on a straight- line basis as an expense in profit or loss. Short-term leases are leases with a lease termof 12 months or less and do not contain a purchase option. Low value assets are those assets valued at less than RM20,000 each when purchased new.