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AirAsia X Berhad • Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2014
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(i)
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.
Finance leases
Leases of property, plant and equipment where the Group and Company assume substantially all the benefits and risks of ownership are classified as finance leases.
Finance leases are capitalised at the commencement dates of the respective leases at the lower of the fair value of the leased property and the present value of the
minimum lease payments at the date of inception. Each lease payment is allocated between the liability and finance charges so as to achieve a periodic constant 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 charge
is charged to the income statements over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
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(e) above. Where there is no reasonable certainty that the ownership will be transferred to the Group and Company, 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 incentives received from the lessor) are charged to the income statements on a straight-line basis over the lease period.
Assets leased out by the Group and Company under operating leases are included in property, plant and equipment in the balance sheets. They are depreciated over
their expected useful lives on a basis consistent with similar owned property, plant and equipment. Rental income (net of any incentives given to lessees) is recognised
on a straight line basis over the lease term.
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.
