Chemical Company of Malaysia Berhad Annual Report 2019

4. Right-of-use assets (continued) 4.1 Extension options Some leases of buildings contain extension options exercisable by the Group up to one year before the end of the non-cancellable period. Where practicable, the Group seeks to include extension options in new leases to provide operational flexibility. The extension option held is exercisable only by the Group and not by the lessor. The Group assesses at lease commencement whether it is reasonably certain to exercise the extension option. The Group reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant change in circumstances within its control. Group Lease liabilities recognised (discounted) Potential future lease payments not included in lease liabilities (discounted) Historical rate of exercise of extension options % Buildings 923 5,013 100 4.2 Significant judgements and assumptions in relation to leases The Group assesses at lease commencement by applying significant judgement whether it is reasonably certain to exercise the extension options. Group entities consider all facts and circumstances including their past practice and any cost that will be incurred to change the asset if an option to extend is not taken, to help them determine the lease term. The Group also applied judgement and assumptions in determining the incremental borrowing rate of the respective leases. Group entities first determine the closest available borrowing rates before using significant judgement to determine the adjustments required to reflect the term, security, value or economic environment of the respective leases. 4.3 Restriction imposed by lease The lease contracts for buildings restrict the Group’s ability to sublease the leased assets in the respective contracts. | Notes to the Financial Statements (continued) | 156 CHEMICAL COMPANY OF MALAYSIA BERHAD