Page 113 - Annual Report 2019

110 ANNUAL REPORT 2019 QFC REGULATORY AUTHORITY FINANCIAL STATEMENTS

Accounting policies applied from 1 January 2019 (cont.) iii) Short-term leases and leases of low-value assets Impairment of non-financial assets
If ownership of the leased asset transfers to the QFC The QFC Regulatory Authority applies the short-term lease The QFC Regulatory Authority assesses at each reporting date
Regulatory Authority at the end of the lease term or the recognition exemption to its short-term leases of building (i.e., whether there is an indication that an asset may be impaired.
cost reflects the exercise of a purchase option, depreciation those leases that have lease term of 12 months or less from If any indication exists, or when annual impairment testing for
is calculated using the estimated useful life of the asset. the commencement date and do not contain a purchase an asset is required, the QFC Regulatory Authority estimates
The right-of-use assets are also subject to impairment. option). It also applies the lease of low-value assets recognition the asset’s recoverable amount. An asset’s recoverable amount
exemption to the lease of office equipment that is considered is the higher of an asset’s fair value less costs to sell and its
ii) Lease liabilities of low value (i.e., below USD 5,000). Lease payment on short- value in use and is determined for an individual asset, unless
term leases and leases of low-value assets are recognised the asset does not generate cash inflows that are largely
At the commencement date of the lease, the QFC Regulatory as expense on a straight-line basis over the lease term. independent of those from other assets or groups of assets.
Authority recognises lease liabilities measured at the present
value of lease payments to be made over the lease term. Accounting policy applied up to 31 December 2018 Where the carrying amount of an asset exceeds its recoverable
The lease payments include fixed payments (including in- Finance leases, which transfer to the QFC Regulatory amount, the asset is considered impaired and is written
substance fixed payments) less any lease incentives receivable, Authority all the risks and benefits incidental to ownership down to its recoverable amount. In assessing value in use,
variable lease payments that depend on an index or a rate, of the leased item, are capitalised at the inception of the the estimated future cash flows are discounted to their
and amounts expected to be paid under residual value lease at the fair value of the leased asset or, if lower, at present value using a discount rate that reflects current
guarantees. Variable lease payments that do not depend on the present value of the minimum lease payments. Lease market assessments of the time value of money and the
an index or a rate are recognised as expenses (unless they payments are apportioned between the finance charges and risks specific to the asset. In determining fair value less
are incurred to produce inventories) in the period in which reduction of the lease liability so as to achieve a constant costs to sell, an appropriate valuation model is used.
the event or condition that triggers the payment occurs.
rate of interest on the remaining balance of the liability.
Finance charges are charged directly against income.
In calculating the present value of lease payments, the QFC
Regulatory Authority uses its incremental borrowing rate Leases where the QFC Regulatory Authority as a lessee
at the lease commencement date because the interest does not retain substantially all the risks and benefits
rate implicit in the lease is not readily determinable. of ownership of the asset are classified as operating
After the commencement date, the amount of lease leases. Operating lease payments are recognised
liabilities is increased to reflect the accretion of interest as an expense in the statement of comprehensive
and reduced for the lease payments made. In addition, income on a straight line basis over the lease term.
the carrying amount of lease liabilities is remeasured
if there is a modification, a change in the lease term, a Leases where the lessor retains substantially all the risks
change in the lease payments (e.g., changes to future and benefits of ownership of the asset are classified as
payments resulting from a change in an index or rate used operating leases. Operating lease payments are recognised
to determine such lease payments) or a change in the as an expense in the statement of comprehensive
assessment of an option to purchase the underlying asset.
income on a straight line basis over the lease term.