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KUWAIT ENERGY PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended 30 June 2016
23
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
The Group as lessee
Assets held under finance leases are recognised as assets of the group at their fair value or, if lower, at the present
value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to
the lessor is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a
constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in
profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance
with the group’s general policy on borrowing costs (see above).
Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease
except where another more systematic basis is more representative of the time pattern in which economic benefits
from the lease asset are consumed.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a
liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis,
except where another systematic basis is more representative of the time pattern in which economic benefits from
the leased asset are consumed.
Foreign currencies
The individual financial statements of each Group entity are presented in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each entity are expressed in US$, which is the functional and
presentation currency of the Company.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the
transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the
rates prevailing at the consolidated statement of financial position date. Non-monetary items carried at fair value that
are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was
determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not
retranslated.
Exchange differences are recognised in the consolidated statement of income in the year in which they arise except
for exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is
neither planned nor likely to occur, which form part of the net investment in a foreign operation, and which are
recognised in the foreign currency translation reserve and recognised in the consolidated statement of income on
disposal of the net investment.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign
operations are expressed in US$ using exchange rates prevailing at the balance sheet date. Income and expense items
are translated at the average exchange rates for the year, unless exchange rates fluctuated significantly during that
year, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any,
are classified as equity and transferred to the Group’s foreign currency translation reserve. Such exchange differences
are recognised in the consolidated statement of income in the year in which the foreign operation is disposed of.