18 / 43
AL MAZA YA HOLDING COMPANY K.S.c. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2011
MAlAYA
AJM10LMO
3.
BASIS OF PREPRA TION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and equipment
Property and equipment are carried at cost less accumulated depreciation and any accumulated impairment
losses. Cost includes expenditure that is directly attributable to the acquisition of the asset (including borrowing
costs).
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Group and the
cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other
repairs and maintenance are charged to the consolidated statement of income during the year in which they are
incurred.
Depreciation is calculated based on the estimated useful lives of the applicable assets on a straight-line basis
commencing when the assets are ready for their intended use.
The estimated useful lives, residual values and depreciation methods are reviewed at each consolidated
statement of financial position date, with the effect of any changes in estimate accounted for on prospective
basis.
Properties in the course of construction for production, or administrative purposes, or for purposes not yet
determined, are carried at cost, less any recognised impairment loss. Cost includes professional fees.
Depreciation of these assets, on the same basis as other property and equipment, commences when the assets
are ready for their intended use.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying
amount is greater than its estimated recoverable amount.
The gain or loss arising on the disposal or retirement of an item of property and equipment is determined as the
difference between the sales proceeds and the carrying amount of the asset and is recognised in the consolidated
statement of income.
Leasing
Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases.
The Group as lessor
Amounts due from lessees under finance leases are recognised as receivables at the amount of the Group's net
investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant
periodic rate of return on the Group's net investment outstanding in respect of the leases.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.
Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of
the leased asset and recognised on a straight-line basis over the lease term.
The Group as lessee
Assets held under finance leases are initially recognised as assets of the Group at their fair value at the
inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding
liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to
achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised
immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are
capitalised in accordance with the Group's general policy on borrowing costs. Contingent rentals are recognised
as expenses in the period in which they are incurred.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except
where another systematic basis is more representative of the time pattern in which economic benefits from the
leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the
period in which they are incurred.
16