Page 120 - HRC_AR2020

118 I 2020 ANNUAL REPORT I financial reports

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020 (CONTINuED)

15 leases (continued)
(i) the balance sheet shows the following amounts relating to leases: (continued)
lease liabilities
2020 2019
rM’000 rM’000

Current 7,722 7,336
Non-current 15,796 23,421
At 31 December 23,518 30,757

(ii) nature of the lessee’s leasing activities and restrictions or covenants imposed by leases
The Company leases various equipment, vehicles and tugboats. Rental contracts are typically made for fixed periods
of 3 to 5 years but may have extension options.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowings,
except for land lease.
(iii) Variable payments terms
The Company does not have any variable payment terms on its lease agreements.
(iv) extension options and termination options
Extension and termination options are included in lease contracts across the Company. Lease terms are negotiated
on an individual basis and contain a wide range of different terms and conditions. Extension and termination options
are included, when possible, to provide greater flexibility. The individual terms and conditions used vary across the
lease contracts.
In cases in which the Company is not reasonably certain to exercise an optional extended lease term, payments
associated with the optional period are not included within lease liabilities. In the current and previous financial year,
the Company did not exercise any extension option, therefore no financial effect recognised in lease liabilities.
In the previous financial year, the Company modified one of its lease contracts. Gain on modification of lease contract
is included in “other income” line item in the profit or loss.
Some of the lease agreements contain termination options. These options are used to limit the period to which
the Company is committed to individual lease contracts and to maximise operational flexibility. For these lease
agreements, recognised lease liabilities do not include potential future rental payments after the exercise date
of termination options because the Company is not reasonably certain to extend the lease beyond that date. This is
the case for most leases for which a longer lease term can be enforced only by the Company and not by the lessor,
and for which there is no penalty associated with the option.