Page 51 - NIB Annual Report 12-13 | 13-14

TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD
Notes to Financial Statements, continued Year ended March 31, 2013
3. Significant accounting policies, continued
(i) Leases
(i) Operating leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor, are classified as operating leases. Assets leased out under operating leases were included in investment property on the statement of financial position. Rental expenses and rental income were recognised in the statement of income, expenses and reserves on a straight-line basis over the term of the lease.
(ii) Finance leases
Asset held by NIB under leases which transfer to NIB substantially all of the risks and rewards of ownership are classified as finance leases. On initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.
Assets held under other leases are classified as operating leases and are not recognised in NIB’s statement of financial position.
NIB considers whether a lease is a finance lease or an operating lease based on the substance of the transaction rather than the form. The following characteristics are considered by NIB that would normally lead to a lease being classified as a finance lease:
 the lease transfers ownership of the asset to the lessee by the end of the lease term;
 the lessee has the option to purchase the asset at a price which is expected to be sufficiently lower than fair value at the date the option becomes exercisable and, at the inception of the lease, it is reasonably certain that the option will be exercised;
 the lease term is for the major part of the economic life of the asset, even if title is not transferred;
 at the inception of the lease, the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset; and
 the leased assets are of a specialised nature such that only the lessee can use them without major modifications being made.
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