KENANGA ANNUAL REPORT 2017

3. ACCOUNTING POLICIES (CONT’D.) 3.4 Summary of significant accounting policies (cont’d.) (m) Leases (cont’d.) (ii) Operating leases Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the term of the relevant lease. (n) Share capital Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared. The transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax. Equity transaction costs comprise only those incremental external costs directly attributable to the equity transaction which would otherwise have been avoided. (o) Derivative financial instruments Derivative financial instruments are initially recognised at fair value on the date on which derivative contracts are entered into and are subsequently remeasured at their fair values. Fair values are obtained from quoted market prices in active markets, including recent market transactions, and valuation techniques, including discounted cash flow models and option pricing models, as appropriate. Derivative financial instruments are presented separately in the statements of financial position as assets (positive changes in fair values) and liabilities (negative changes in fair values). Any gains or losses arising from changes in the fair value of the derivatives are recognised immediately in profit or loss. (p) Income recognition (i) Interest, financing and profit income Interest income is recognised in profit or loss for all interest or profit bearing assets on an effective yield basis. Interest income includes the amortisation of premium or accretion of discount. Once a loan has been written down as a result of an impairment loss, interest income is thereafter recognised using the rate of interest used to discount the future cash flows for the purpose of measuring impairment loss. (ii) Fee and other income Brokerage fees are recognised on contract date upon execution of trade on behalf of clients computed based on a pre-determined percentage of the contract value. Loan arrangement fees and commissions, management and participation fees, underwriting fees and placement fees are recognised as income when all conditions precedent are fulfilled. Custodian fees, guarantee fees and fund management fees are recognised as income based on time apportionment basis. Corporate advisory fees are recognised as income on the completion of each stage of the assignment. Annual Report 2017 31 December 2017 115 notes to the financial statements