48 FGV HOLDINGS BERHAD NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (w) Leases The Group as a lessee Leases are recognised as a right-of-use (“ROU”) asset and a corresponding liability at the date at which the leased asset is available for use by the Group and Company. (a) ROU assets ROU assets are measured at cost comprising the following: • the amount of the initial measurement of lease liability, • any lease payments made at or before the commencement date less any lease incentives received, • any initial direct costs, and • decommissioning or restoration costs. The ROU asset is depreciated over the shorter of the right-of-use asset’s useful life and the lease term on a straightline basis, as follows: ROU assets Estimated useful lives (years) Leasehold land 50 to 933 Buildings, structures and renovations 3 to 60 Plant and machinery 3 to 30 Motor vehicles 3 to 30 Office equipment, tools and other equipment 2 to 3 The ROU assets are adjusted for any remeasurement of the lease liability. At each statement of financial position date, the Group assess whether there is any indication of impairment. If such an indication exists, an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. 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. See significant accounting policies Note 3(o) on impairment of nonfinancial assets. (b) Lease liabilities Lease liabilities are initially measured at the present value of the lease payments that are not paid at that date. The lease payments include the following: • Fixed payments (including in-substance fixed payments), less any lease incentive receivable; • Variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the commencement date, if any; • Amounts expected to be payable by the Group under residual value guarantees; • The exercise price of a purchase and extension options if the group is reasonably certain to exercise that option, if any; and • Payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option, if any. Lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing is used. This is the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the ROU in a similar economic environment with similar term, security and conditions.
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