Notes to the Financial Statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023 2 MATERIAL ACCOUNTING POLICIES (CONTINUED) 2.8 Leases (continued) Accounting as lessee (continued) (b) Right-of-use assets Right-of-use assets are initially measured at cost comprising the following: • the amount of the initial measurement of lease liability; • any lease payments made at or before the commencement date less any lease incentive received; • any initial direct costs; and • decommissioning or restoration costs. Right-of-use assets are subsequently measured at cost, less accumulated depreciation and impairment loss. The right-of-use assets are depreciated over the shorter of the asset’s useful life and the lease term on a straight line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life. In addition, the right-of-use assets are adjusted for certain remeasurement of the lease liabilities. Right-of-use assets are depreciated over the remaining period of the respective leases ranging from 1 to 91 years (2022:1 to 92) years. (c) Lease liabilities Lease liabilities are initially measured at the present value of the lease payments that are not paid at that date. The lease payments include the following: • fixed payments (including in-substance fixed payments), less any lease incentive receivable; • variable lease payments that are based on an index or rate, initially measured using the index or rate as at the commencement date; • amounts expected to be payable by the Group under residual value guarantees; • the exercise price of a purchase and extension options if the Group is reasonably certain to exercise that option; and • payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option. Lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the lessee’s incremental borrowing rate is used. Lease payments are allocated between principal and interest expense. Interest expense is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The Group presents the lease liabilities as a separate line item in the statement of financial position. Interest expense on the lease liabilities is presented within the finance cost in profit or loss. (d) Reassessment of lease liabilities The Group is exposed to potential future increases in variable lease payments that depend on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is remeasured and adjusted against the right-of-use assets. Integrated Annual Report 2023 176
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