Serba Dinamik Annual Report 2019

317 N O T E S T O T H E F I N A N C I A L S TAT E M E N T S 36. SIGNIFICANT CHANGES IN ACCOUNTING POLICIES (CONTINUED) (i) MFRS 16, Leases (Continued) As a lessee Where the Group and the Company are a lessee, the Group and the Company applied the requirement of MFRS 16 retrospectively with the cumumlative effect of initial application as an adjustment to the opening balance of retained earnings at 1 January 2019. At 1 January 2019, for leases that were classified as operating lease under MFRS 117, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group entities’ incremental borrowing rate as at 1 January 2019. The weighted-average rate applied is 7%. Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments. The Group used the following practical expedients when applying MFRS 16 to leases previously classified as operating lease under MFRS 117: applied a single discount rate to a portfolio of leases with similar characteristics; applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term as at 1 January 2019; excluded initial direct costs frommeasuring the right-of-use asset at the date of initial application; and used hindsight when determining the lease term if the contract contains options to extend to terminate the lease. For leases that were classified as finance lease under MFRS 117, the carrying amounts of the right-of-use asset and the lease liability at 1 January 2019 are determined to be the same as the carrying amount of the leased asset and lease liability under MFRS 117 immediately before that date. (ii) Amendments to MFRS 123, Borrowing Cost (Annual Improvements to MFRS Standards 2015-2017 Cycle) In previous years, borrowing costs relating to a specific qualifying assets were capitalised into the cost of the qualifying assets. The capitalisation of borrowing costs ceased when substantially all activities necessary to prepare the qualifying asset for its intended use was completed. Any borrowing costs incurred subsequently were expensed off to profit or loss. Following the amendments to MFRS 123, when qualifying asset is ready for its intended use, any outstanding borrowingmade specifically to obtain that qualifying asset is treated as part of general borrowing costs applicable to all borrowings of the Group during the year. The change in this accounting policy is applied prospectively.