2. ACCOUNTING POLICIES Continued 2.8 Significant accounting policies Continued (f) Foreign currencies Continued EXPLANATORY NOTES 30 SEPTEMBER 2023 • all resulting exchange differences are recognised in other comprehensive income; • goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate; and • on disposal of foreign entities, such translation differences are recognised in the profit or loss as part of the gain or loss. (g) Inventories Inventories are valued at lower of cost and net realisable value. Net realisable value is determined based on the estimated selling price in the ordinary course of business less any estimated costs associated with the sale. When an inventory item is initially recognised, it is measured at cost. In subsequent periods, inventory is measured at the lower of cost and net realisable value. (h) Leases Accounting for leases - where Group and Company is the lessor Lease income from operating leases where the Group and the Company are a lessor is recognised in income on a straight line basis over the lease term. Initial direct costs incurred in obtaining the lease are added to the carrying amount of the underlying asset and recognised as expense over the lease term on the same basis as lease income. On the other hand, lease income from finance leases where the Group and the Company are a lessor is recognised as disclosed in Note 2.8(e)(iv). The respective leased assets are included in the balance sheet based on their nature. The leased assets are moveable assets (mainly motor vehicles). Accounting for leases - where Group and Company is the lessee From 1 October 2019, all leases are accounted for by recognising a right-of-use asset and a lease liability, except for: • Leases of low value assets; and • Leases with a duration of 12 months or less. Identifying Leases The Group and the Company account for a contract, or a portion of a contract, as a lease when it conveys the right to use an asset for a period of time in exchange for consideration. Leases are those contracts that satisfy the following criteria: a) There is an identified asset; b) The Group and the Company obtain substantially all the economic benefits from use of the asset; and c) The Group and the Company have the right to direct use of the asset. The Group and the Company consider whether the supplier has substantive substitution rights. If the supplier does have those rights, the contract is not identified as giving rise to a lease. In determining whether the Group and the Company obtain substantially all the economic benefits from use of the asset, the Group and the Company consider only the economic benefits that arise from the use of the asset, not those incidental to legal ownership or other potential benefits. In determining whether the Group and the Company have the right to direct use of the asset, the Group and the Company consider whether it directs how and for what purpose the asset is used throughout the period of use. If there are no significant decisions to be made because they are pre-determined due to the nature of the asset, the Group and the Company consider whether it was involved in the design of the asset in a way that predetermines how and for what purpose the asset will be used throughout the period of use. If the contract or portion of a contract does not satisfy these criteria, the Group and the Company apply other applicable IFRSs rather than IFRS 16. 114 CIM FINANCE ANNUAL REPORT
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