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2.
Summary of significant accounting policies (cont’d.)
2.10 Leases (cont’d.)
Finance leases (cont’d.)
Property, plant and equipment acquired under finance lease contracts are depreciated over the estimated useful life of the
asset, in accordance with the annual rates stated in Note 2.5 above. 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 and its useful life.
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 (net of any incentives received from the lessor) are charged to profit
or loss on a straight-line basis over the lease period.
Sale and leaseback transactions
When a sale and leaseback results in a finance lease, any gain on the sale is deferred and recognised as income over the lease
term. Any loss on the sale is immediately recognised as an impairment loss when the sale occurs.
If the leaseback is classified as an operating lease, then any gain is recognised immediately if the sale and leaseback terms are
demonstrably at fair value. Otherwise, the sale and leaseback are accounted for as follows:
– If the sale price is below fair value then the gain or loss is recognised immediately other than to the extent that a loss is
compensated for by future rentals at below market price, then the loss is deferred and amortised over the period that the
asset is expected to be used.
– If the sale price is above fair value, then any gain is deferred and amortised over the useful life of the asset.
– If the fair value of the asset is less than the carrying amount of the asset at the date of the transaction, then that difference
is recognised immediately as a loss on the sale.
Lessor
Operating leases
Assets leased out by the Group under operating leases are included in property, plant and equipment in the balance sheet.
They are depreciated over their expected useful lives on a basis consistent with similar owned property, plant and equipment.
Lease income (net of any incentives given to lessees) is recognised over the term of the lease on a straight-line basis.
2.11 Inventories
Inventories which comprise consumables used internally for repairs and maintenance are stated at the lower of cost and net
realisable value.
Cost is determined on the weighted average basis, and comprises the purchase price and incidentals incurred in bringing the
inventories to their present location and condition.
Net realisable value represents the estimated selling price in the ordinary course of business, less all applicable variable
selling expenses. In arriving at net realisable value, due allowance is made for all damaged, obsolete and slow-moving items.
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AirAsia Berhad
REPORTS AND FINANCIAL STATEMENTS