axiata group berhad | annual report 2015
141
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(r) Share capital
(i) Classification
Ordinary share with discretionary dividends are classified as equity. Other shares are classified as equity and/or liability according to the
economic substance of the particular instrument.
Distribution to holders of a financial instrument classified as an equity instrument is charged directly to equity.
(ii) Share issue expenses
Incremental external costs directly attributable to the issuance of new shares or options are shown in equity as a deduction, net of tax from
the proceeds.
(iii) Dividends to shareholders of the Company
Dividend distribution to the Company’s shareholders is recognised as a liability in the period they are approved by the Board of Directors
except for the nal and special dividends which are subject to approval by the Company’s shareholders.
(s) Leases
A lease is an agreement whereby the lessor conveys to the lessee in return for a payment, or series of payments, the right to use an asset for an
agreed period of time.
Accounting by lessee
(i) Finance leases
Leases of PPE where the Group assumes substantially all the benefits and risks of ownership are classified as finance leases.
Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased asset and the present value of the
minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant periodic
rate of interest on the balance outstanding. The corresponding rental obligations, net of finance charges, are included in payables. The
interest element of the finance lease is charged to the profit or loss over the lease period, so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period.
PPE acquired under finance leases are depreciated over the estimated useful life of the asset, in accordance with the annual rates stated
in Note 3(c)(ii) to the financial statements. Where there is no reasonable certainty that the ownership will be transferred to the Group, the
asset is depreciated over the shorter of the lease term or its estimated useful life.
Initial direct costs incurred by the Group in negotiating and arranging finance leases are added to the carrying amount of the leased assets
and recognised as an expense in profit or loss over the lease term on the same basis as the lease expense.
(ii) Operating leases
Leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to the profit or loss on a straight-line basis over the lease period.
Accounting by lessor
(i) Finance leases
When assets are leased out under a finance lease, the present value of the lease payments is recognised as a receivable. The difference
between the gross receivable and the present value of the receivable is recognised as unearned finance income. Lease income is recognised
over the term of the lease using the net investment method so as to reflect a constant periodic rate of return.
