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CHAIRMAN’S DELIVERING MSM MANAGEMENT DISCUSSION GROUP FINANCIAL
STATEMENT VALUE OVERVIEW & ANALYSIS REPORT

NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(r) Leases (continued)
The Group and Company as a lessee (continued)
(b) Lease liabilities (continued)
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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Lease payments are allocated between the liability and finance cost. The finance cost is charged to profit or loss
over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability
MSM MALAYSIA HOLDINGS BERHAD Annual Report 2020
for each period.
Variable lease payments that depend on sales are recognised in profit or loss in the period in which the condition
that triggers those payments occurs.

The Group presents the lease liabilities as a separate line item in the statement of financial position.
Interest expense on the lease liability is presented within the finance cost in the statement of profit or loss.
(c) Lease term

In determining the lease term, the Group considers all facts and circumstances that create an economic incentive
to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination
options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
The Group reassesses the lease term upon the occurrence of a significant event or change in circumstances
that is within the control of the Group and affects whether the Group is reasonably certain to exercise an option
not previously included in the determination of lease term, or not to exercise an option previously included
in the determination of lease term. A revision in lease term results in remeasurement of the lease liabilities
(refer to (d) below).

(d) Reassessment of lease liabilities
The Group initially estimates and recognises amounts expected to be payable under residual value guarantees as
part of the lease liability. The amounts are reviewed, and adjusted if appropriate, at the end of each reporting period.

(e) Short-term leases and leases of low value assets
Short-term leases are leases with a lease term of 12 months or less, which cost less than RM20,000 each if
purchased new. Payments associated with short-term leases and leases of low-value assets are recognised on a
straight-line basis as an expense in profit or loss.
The Group and Company do not separate any non-lease components from lease components, and instead account
for each lease component and any associated non-lease components as a single lease component.