Question 4(b) One EMdibee Corporation

Statements of Financial Position as at 31 July 2017 (Group)

ASSETS Non-Current Assets Property, plant and equipment Investment properties Trade and other receivables	note 2017 2018 9 364,414 365,093 10 265,471 265,471 167,526 303,646

Additional information:

1. The company adopts MFRS 16 that replaces the guidance in MFRS 117, Leases, IC Interpretation 4, Determining whether an Arrangement contains a Lease, IC Interpretation 115, Operating Leases-Incentives and IC Interpretation 127, Evaluating the Substance of Transaction involving the Legal form of a Lease. 2. Leases in terms of which the company assumes substantially all the risks and rewards of ownership are classified as finance lease. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. 3. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed. Leasehold land which in substance is a finance lease is classified as property, plant and equipment, or as investment property if held to earn rental income or for capital appreciation or for both. 4. Leases, where the Company does not assume substantially all the risks and rewards of ownership are classified as operating leases and, except for property interest held under operating lease, the leased assets are not recognized on the statement of financial position. Property interest held under an operating lease, which is held to earn rental income or for capital appreciation or for both, is classified as investment property and measured using fair value model.

Payments made under operating leases are recognized in profit or loss on a straight line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Lease incentives are recognized in profit or loss as an integral part of the total lease expense, over the term of the lease. Contingent rentals are charged to profit or loss in the reporting period in which they are incurred. 5. Leasehold land which in substance is an operating lease is classified as prepaid lease payments. 6. Investment properties are properties which are owned to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. 7. Investment properties are measured at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the investment property. 8. Freehold land has an unlimited useful life and therefore is not depreciated. Leasehold land is depreciated over the lease term of 60 years. 9. Depreciation of the buildings is provided for on a straight-line basis to write-off the cost of each asset to its residual value over the estimated useful life of 50 years. 10. An investment property is derecognized on its disposal, or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal. The difference between the net disposal proceeds and the carrying amount is recognized in profit or loss in the period in which the item is derecognised. Required: Prepare the necessary disclosure for notes to accounts as required by MFRS 140 Investment Property and MFRS 16 Leases. These should include the notes on (i) the Basis of preparation and (ii) Significant accounting policies and estimates. (15 marks)