Sample Disclosure – Change In Accounting Policy On Leasehold Land For Own Use (4 January 2009)

Except for the changes in accounting policies and their effects as discussed below, the adoption of the new and revised FRSs, amendments to FRSs and interpretations do not have any other significant impact on the financial statements of the Group and of the Company:

Leasehold land held for own use

Prior to day/month/year, leasehold land held for own use was classified as property, plant and equipment and was stated at cost less accumulated depreciation and any accumulated impairment losses. The adoption of the revised FRS 117 has resulted in a change in the accounting policy relating to the classification of leases of land and buildings. Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets and the land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification. Leasehold land held for own use is now classified as operating lease and where necessary, the minimum lease payments or the up-front payments made are allocated between the land and the buildings elements in proportion to the relative fair values for leasehold interests in the land element and buildings element of the lease at the inception of the lease. The up-front payment relating to the land element represents prepaid lease payments and are amortised on a straight-line basis over the lease term.

The Group has applied the change in accounting policy in respect of leasehold land in accordance with the transitional provisions of FRS 117. At day/month/year, the unamortised amount of leasehold land is retained as the surrogate carrying amount of prepaid lease payments as allowed by the transitional provisions. The effects on the consolidated balance sheet as at day/month/year are set out below:




Decrease in property, plant and equipment


Decrease in investment properties


Increase in prepaid land lease payments


There were no effects on the consolidated income statement for the year ended day/month/year and the Company’s separate financial statements.

The reclassification of leasehold land as prepaid land lease payments has been accounted for retrospectively and as such, certain comparatives have been restated.

Previously Stated






Property, plant and equipment




Investment properties




Prepaid land lease payments



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