NOTES TO THE FINANCIAL STATEMENTS
FOR THE FInAncIAL yEAR EnDED 30 JunE 2016
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
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Financial guarantees
A financial guarantee contract is a contract that requires the issuer to make specified payments to
reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due.
Financial guarantee contracts are initially recognised at their fair values plus transaction costs. Financial
guarantees are classified as financial liabilities.
Subsequent to initial measurement, the financial guarantees are stated at the higher of the initial fair
value less cumulative amortisation and the expected amount payable to the holder. Financial guarantee
contracts are amortised in profit or loss over the period of the guarantee.
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Leases
When the Group entity is the lessee:
Finance leases
Leases of property, plant and equipment where the Group assumes substantially all the risks and rewards
incidental to ownership are classified as finance leases. Finance leases are capitalised at the inception of
the lease at the lower of fair value of the leased asset or the present value of the minimum lease payments.
Each lease payment is allocated between reduction of the liability and finance charges. The corresponding
rental obligations, net of finance charges, are included in finance lease liabilities. The interest element of
the finance cost is taken 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 for each period. The asset acquired under finance leases
are depreciated over the shorter of the useful life of the asset or the lease term.
Operating leases
Leases where a significant portion of the risks and rewards incidental to ownership are retained by the
lessor are classified as operating leases. Payments made under operating leases (net of any incentives
received from the lessor) are taken to profit or loss on a straight-line basis over the period of the lease.
When an operating lease is terminated before the lease period expires, any payment required to be made
to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.
When a Group entity is the lessor:
Operating leases
Leases where the Group entity retains substantially all the risks and rewards incidental to ownership
of the asset are classified as operating leases. Rental income (net of any incentives given to lessees) is
recognised on a straight-line basis over the lease term.
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ISOTEAM LTD.
ANNUAL REPORT 2016
