PRG Holdings Berhad Annual Report 2019

PRG HOLDINGS BERHAD 108 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2019 cont’d 5. ADOPTION OF NEW MFRSs AND AMENDMENTS TO MFRSs 5.1 New MFRSs adopted during the financial year The Group and the Company adopted the following Standards of the MFRS Framework that were issued by the Malaysian Accounting Standards Board (“MASB”) during the financial year: Title Effective Date MFRS 16 Leases 1 January 2019 IC Interpretation 23 Uncertainty over Income Tax Treatments 1 January 2019 Amendments to MFRS 128 Long-term Interests in Associates and Joint Ventures 1 January 2019 Amendments to MFRS 9 Prepayment Features with Negative Compensation 1 January 2019 Amendments to MFRS 3 Annual Improvements to MFRS Standards 2015 - 2017 Cycle 1 January 2019 Amendments to MFRS 11 Annual Improvements to MFRS Standards 2015 - 2017 Cycle 1 January 2019 Amendments to MFRS 112 Annual Improvements to MFRS Standards 2015 - 2017 Cycle 1 January 2019 Amendments to MFRS 123 Annual Improvements to MFRS Standards 2015 - 2017 Cycle 1 January 2019 Amendments to MFRS 119 Plan Amendment, Curtailment or Settlement 1 January 2019 Adoption of the above Standards did not have any material effect on the financial performance or position of the Group and of the Company except for the adoption of MFRS 16 as described in the following sections. MFRS 16 Leases MFRS 16 supersedes MFRS 117 Leases , IFRIC 4 Determining whether an Arrangement contains a Lease , SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease . MFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to recognise most leases on the financial statements. Lessor accounting under MFRS 16 is substantially unchanged from MFRS 117. Lessors would continue to classify leases as either operating or finance leases using similar principles as in MFRS 117. Therefore, MFRS 16 does not have a material impact for leases for which the Group is the lessor. The Group applied MFRS 16 using the modified retrospective approach, for which the cumulative effect of initial application is recognised in retained earnings as at 1 January 2019. Accordingly, the comparative information presented is not restated. On adoption of MFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as “operating leases” under the principles of MFRS 117. These liabilities were measured at the present value of the remaining lease payments, discounted using the incremental borrowing rate of the Group as of 1 January 2019. The range of incremental borrowing rates of the Group applied to the lease liabilities on 1 January 2019 were between 3.5% to 6.3%. In order to compute the transition impact of MFRS 16, a significant data extraction exercise was undertaken by management to summarise all property and equipment lease data such that the respective inputs could be uploaded into management’s model. The incremental borrowing rate method has been adopted where the implicit rate of interest in a lease is not readily determinable. For leases previously classified as finance leases, the Group recognised the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right-of-use asset and the lease liability respectively at the date of initial application. The measurement principles of MFRS 16 are only applied after that date.