1. Recognition and Measurement
The Company recognizes a right-of-use asset and a corresponding lease liability at the lease commencement date, except for short-term and low-value leases.
Right-of-Use Assets
Right-of-use assets are initially measured at cost, which includes:
The initial amount of lease liability recognized.
Any lease payments made before the commencement date.
Any initial direct costs incurred.
An estimate of dismantling or restoration costs (if applicable).
Subsequently, right-of-use assets are measured using the cost model, where they are depreciated on a straight-line basis over the shorter of the lease term or the asset's useful life.
Lease Liabilities
Lease liabilities are initially measured at the present value of future lease payments, discounted using the incremental borrowing rate (IBR) if the implicit rate in the lease is not readily determinable. Subsequent measurement includes:
Interest expense recognized using the effective interest method.
Lease payments reducing the liability.
Remeasurement due to lease modifications or changes in estimates (e.g., extension options, residual value guarantees).
2. Exemptions – Short-Term and Low-Value Leases
The Company applies the following practical expedients:
Short-term leases (lease term ≤ 12 months) and low-value asset leases (e.g., laptops, office furniture) are not recognized as right-of-use assets or lease liabilities.
Instead, lease payments for these leases are recognized as an expense on a straight-line basis in the income statement over the lease term.
3. Lease Modifications
If there is a modification to an existing lease (e.g., change in lease term, revised lease payments), the lease liability and right-of-use asset are remeasured accordingly. If the modification is a separate lease, it is accounted for as a new lease.
4. Presentation & Disclosure
Right-of-use assets are presented separately in the statement of financial position or included within the appropriate asset class (e.g., property, plant, and equipment).
Lease liabilities are presented separately or within borrowings/financial liabilities.
Depreciation on right-of-use assets is recorded in the income statement under operating expenses.
Interest expense on lease liabilities is presented under finance costs.