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Notes to the financial statements
31 December 2012
(continued)
Annual Report 2012 KPJ Healthcare Berhad
2. Summary of significant accounting policies (continued)
2.20 Leases
(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 finance charges and reduction of the lease liability so as
to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit 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 profit or loss on a straight-line basis over the lease term. The aggregate benefit 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 retains substantially all the risks and rewards of ownership of the asset are classified 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 bases as rental income.
2.21 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of
economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably.
Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material,
provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the
increase in the provision due to the passage of time is recognised as a finance cost.
2.22 Employee benefits
(a) Short term benefits
Wages, salaries, bonuses and social security contributions are recognised as an expense in the period in which the associated services are
rendered by employees of the Group. Short term accumulating compensated absences such as paid annual leave are recognised when services
are rendered by employees that increase their entitlement to future compensated absences. Short term non-accumulating compensated absences
such as sick leave are recognised when the absences occur.
(b) Defined contribution plans
The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. The Malaysian
companies in the Group make contributions to the Employees Provident Fund in Malaysia, a defined contribution pension scheme. Contributions to
defined contribution pension schemes are recognised as an expense in the period in which the related service is performed.