- 13 - The lease liability is initially measured at the present value of the lease payments that are not paid at that date, discounted by using the interest rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise: - Fixed payments (including in-substance fixed payments), less any lease incentives receivable; - Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; - Amount expected to be payable by the lease under residual value guarantees; - Exercise price of purchase options, if the lease is reasonably certain to exercise the options; - Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease. The lease liability is subsequently measured using the effective interest method and by reducing the carrying amount to reflect the lease payments made. The Group recognises interest from lease liability in the statement of profit or loss. The Group remeasures the lease liability and makes a corresponding adjustment to the related right-of-use asset whenever: - The lease term has been changed resulting in a change in the assessment of exercise of a purchase option to purchase the underlying asset, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate. - The lease payments have been changed due to changes in an index or a rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate. - A lease contract is modified and the lease modification that is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification. The right-of-use assets comprise the initial measurement of the corresponding lease liability, including lease payments made at or before the commencement day, any initial direct costs, less any lease incentives received. They are subsequently measured at cost less accumulated depreciation and accumulated impairment losses. Right-of-use assets are depreciated over the shorter period of lease term or useful life of the underlying asset. If a lease transfers ownership of the underlying asset and the Group expects to exercise a purchase option, the related right-of-use is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease. In addition, the right-of-use assets are assessed for impairment in accordance with TAS 36 “Impairment of assets”. The Group as lessor Leases for which the Group is a lessor are classified as operating leases. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term. 245 BUSINESS OPERATION AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL REPORTS AND FINANCIAL STATEMENTS APPENDIX
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