NTUC Income AR 2018

Notes to the Financial Statements For the Financial Year Ended 31 December 2018 35. New standards and interpretations not adopted A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2018, and have not been applied in preparing these financial statements. The Group does not plan to adopt these standards early. These new standards include, among others, FRS 116 Leases and FRS 117 Insurance Contracts. • FRS 116 eliminates the lessee’s classification of leases as either operating leases or finance leases and introduces a single lessee accounting model. Applying the new model, a lessee is required to recognise right-of-use (“ROU”) assets and lease liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. FRS 116 substantially carries forward the lessor accounting requirements in FRS 17 Leases . Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for these two types of leases using the FRS 17 operating lease and finance lease accounting models respectively. However, FRS 116 requires more extensive disclosures to be provided by a lessor. When effective, FRS 116 replaces existing lease accounting guidance, including FRS 17, INT FRS 104 Determining whether an Arrangement contains a Lease , INT FRS 15 Operating Leases – Incentives, and INT FRS 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease . FRS 116 is effective for annual periods beginning on or after 1 January 2019, with early adoption permitted. The Group plan to apply FRS 116 initially on 1 January 2019, using the modified retrospective approach. The Group plan to apply the practical expedient to grandfather the definition of a lease on transition. This means that FRS 116 will be applied to all contracts entered into before 1 January 2019 and identified as leases in accordance with FRS 17 and INT FRS 4. i. The Group as lessee The Group expect to measure lease liabilities by applying a single discount rate to their portfolio of rental leases. Furthermore, the Group are likely to apply the practical expedient to recognise amounts of ROU assets equal to their lease liabilities at 1 January 2019. The Group expect their existing operating lease arrangements to be recognised as ROU assets with corresponding lease liabilities under FRS 116. The Company expects to recognise ROU assets and lease liabilities of $9.5 million and provision for reinstatement costs of $0.3 million as at 1 January 2019. The nature of expenses related to those leases will change as FRS 116 replaces the straight-line operating lease expense with depreciation charge for ROU assets and interest expense on lease liabilities. No other significant impact is expected for the Group’s finance leases. ii. The Group as lessor FRS 116 substantially carries forward the current existing lessor accounting requirements. Accordingly, the Group continues to classify its leases as operating leases or finance leases, and to account for these two types of leases using the existing operating lease and finance lease accounting models respectively. The Group will reassess the classification of sub-leases in which the Group is a lessor. Based on the information currently available, the Group do not expect significant impact for leases in which the Group is a lessor. • FRS 117 is effective for years beginning on 1 January 2021, and is to be applied retrospectively. If full retrospective application to a group of contracts is impractical, the modified retrospective or fair value methods may be used. The standard will replace FRS 104 Insurance Contracts and will materially change the recognition and measurement of insurance contracts and the corresponding presentation and disclosures in the Company’s financial statements. 135 2018 ANNUAL REPORT