MKH Annual Report 2020

103 MKH BERHAD 2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT’D) Adoption of New and Amendments to MFRS and Issues Committee (“IC”) Interpretation In the current financial year, the Group and the Company have adopted all the new MFRSs, amendments to MFRSs and IC Interpretation issued by the Malaysian Accounting Standards Board (“MASB”) that are relevant to their operations and effective for annual financial periods beginning on or after 1 October 2019 as follows: MFRS 16 Leases Amendments to MFRS 9 Prepayments Features with Negative Compensation Amendments to MFRS 119 Plan Amendment, Curtailment or Settlement Amendments to MFRS 128 Long Term Interest in Associates and Joint Venture IC Interpretation 23 Uncertainty Over Income Tax Treatments Amendments to MFRSs Annual Improvements to MFRSs 2015 - 2017 Cycle The adoption of these new MFRSs, amendments to MFRSs and IC Interpretation did not result in significant changes in the accounting policies of the Group and the Company, and has no significant effect on the financial performance or position of the Group and the Company, except as disclose below: MFRS 16 Leases In the current year, the Group has applied MFRS 16 Leases that is effective for an annual period that begins on or after 1 October 2019. MFRS 16 introduces significant changes to leasee accounting by removing the distinction between operating and finance lease and requiring the recognition of a right-of-use asset and a lease liability at commencement of all leases, except for short-term leases and leases of low value assets when such recognition exemptions are adopted. In contrast to leasee accounting, the requirements for lessor accounting have remained largely unchanged. The date of initial application of MFRS 16 for the Group is 1 October 2019 and the Group has applied MFRS 16 using the cumulative catch-up approach which: (a) requires the Group to recognise the cumulative effect of initial applying MFRS 16 as an adjustment to the opening balance of retained earnings at the date of initial application; and (b) does not permit restatement of comparatives, which continue to be presented under MFRS 117 Leases (“MFRS 117”) and IC Interpretation 4 Determining Whether an Arrangement contains a Lease (“IC Interpretation 4”). The Group has made use of the practical expedient on transition to MFRS 16 not to reassess whether a contract is or contains a lease. Accordingly, the definition of a lease in accordance with MFRS 117 and IC Interpretation 4 will continue to be applied to those leases entered or changed before 1 October 2019. The change in definition of a lease mainly relates to the concept of control. MFRS 16 determines whether a contract contains a lease on the basis of whether the customer has the right to control the use of an identified asset for a period of time in exchange for consideration. Notes to the Financial Statements FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2020