TUNG LOK RESTAURANTS (2000) LTD / Annual Report
2016
55
Notes to the financial statements
For the financial year ended 31 March 2016
2.
Summary of significant accounting policies (cont’d)
2.15
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
As lessee
Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased
item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value
of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are
apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest
on the remaining balance of the liability. Finance charges are charged to profit or loss. Contingent rents, if any, are
charged as expenses in the periods in which they are incurred.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if
there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.
Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term.
The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease
term on a straight-line basis.
2.16
Inventories
Inventories comprising mainly food and beverages are stated at the lower of cost and net realisable value. Cost
comprises all costs of purchase and those overheads that have been incurred in bringing the inventories to their
present location and condition. Cost is calculated using the first-in-first-out method. Net realisable value represents the
estimated selling price less all estimated costs of completion and estimated costs to make the sale.
2.17
Customer loyalty programme
This relates to loyalty points redeemable by cardholders during the valid redemption period at the Group’s restaurants.
Revenue is recognised when the loyalty points are redeemed.
2.18
Government grants
Government grants are recognised when there is reasonable assurance that the Group will comply with the conditions
attached to them and the grants will be received. Where the grant relates to an asset, the fair value is recognised as
against the carrying amount of the asset on the balance sheet and is amortised to profit or loss over the expected useful
life of the relevant asset by equal annual instalments.
Other government grants are recognised as income over the periods necessary to match them with the costs for which
they are intended to compensate, on a systematic basis. Government grants that are receivable as compensation for
expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future
related costs are recognised in profit or loss in the period in which they become receivable.
