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SUSTAINABILITY EFFECTIVE CORPORATE FINANCIAL ADDITIONAL DETAILS OF THE ANNUAL
REPORT LEADERSHIP GOVERNANCE STATEMENTS INFORMATION GENERAL MEETING

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 lessor
As a lessor, the Company determines at lease inception whether each lease is a finance lease or an operating lease.
To classify each lease, the Company makes an overall assessment of whether the lease transfers substantially all of the
risks and rewards incidental to ownership of the underlying asset to the lessee. As part of this assessment, the Company
considers certain indicators such as whether the lease is for the major part of the economic life of the asset.
(a) Finance leases
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The Company classifies a lease as a finance lease if the lease transfers substantially all the risks and rewards
incidental to ownership of an underlying asset to the lessee.
The Company derecognises the underlying asset and recognises a receivable at an amount equal to the net
investment in a finance lease. Net investment in a finance lease is measured at an amount equal to the sum of
the present value of lease payments from lessee and the unguaranteed residual value of the underlying asset.
Initial direct costs are also included in the initial measurement of the net investment. The net investments is subject
to MFRS 9 impairment. In addition, the Company reviews regularly the estimated unguaranteed residual value.
Lease income is recognised over the term of the lease using the net investment method so as to reflect a constant
periodic rate of return. The Company revises the lease income allocation if there is a reduction in the estimated
unguaranteed residual value. MSM MALAYSIA HOLDINGS BERHAD Annual Report 2020
(b) Sublease classification
When the Company is an intermediate lessor, it assesses the lease classification of a sublease with reference to
the ROU asset arising from the head lease, not with reference to the underlying asset. If a head lease is short-term
lease, then it classifies the sublease as an operating lease.

(s) Employee benefits
(i) Short-term employee benefits
Wages, salaries, bonuses and social security contributions are recognised as expenses in the year in which the
associated services are rendered by employees. Short term accumulating compensated absences such as paid
annual leave are recognised when services are rendered by employees that increase their entitlement to future
compensated absences. Short term non-accumulating compensated absences such as sick leave are recognised
when the absences occur.
(ii) Defined contribution plan
Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions
into separate entities or funds and will have no legal or constructive obligation to pay further contributions if any
of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current
and preceding financial years. Such contributions are recognised as an expense in profit or loss as incurred.
(iii) Termination benefits
The Group pays termination benefits in cases of termination of employment within the framework of the
restructuring. Termination benefits are recognised as a liability and an expense when the Group has a detailed
formal plan for the termination and is without realistic possibility of withdrawal.