AL-SALAM REIT ANNUAL REPORT 2018

AL-SALĀM REIT ANNUAL REPORT 2018 122 would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in proit or loss. Leasing (a) As lessee Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the inance charges and reduction of the lease liability so as to achieve a constant rate of inancing return on the remaining balance of the liability. Finance charges are charged to proit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred. Leased assets are depreciated over the estimated useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life and the lease term. Operating lease payments are recognised as an expense in proit or loss on a straight-line basis over the lease term. The aggregate beneit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis. (b) As lessor Leases where the Group and the Fund retain substantially all the risks and rewards of ownership of the asset are classiied 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 the same basis as rental income. Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any diference between the fair value (net of transaction costs) and the redemption value is recognised in proit or loss over the period of the borrowings using the efective interest method. Borrowings are classiied as current liabilities unless the Group and the Fund have an unconditional right to defer settlement of the liability for at least twelve months after the end of the reporting period. Debt inancing costs incurred arising from extinguishment of borrowings are accounted for in proit or loss in the period during which the extinguishment is concluded. Debt inancing costs incurred on new borrowings are capitalised and amortised over the period of borrowings. All other borrowing costs are recognised in proit or loss in the period they are incurred. Borrowing costs consist of inancing costs and other costs that the Group and the Fund incurred in connection with the borrowing of funds. Provisions Provisions are recognised when the Group and the Fund have a present obligation (legal or constructive) as a result of a past event, when it is probable that the Group and the Fund will be required to settle the obligation, and a reliable estimate of the amount can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash lows estimated to settle the present obligation, its carrying amount is the present value of those cash lows.