RWS AR 23 Final Single pages - Flipbook - Page 140
Notes to the Consolidated Financial Statements (continued)
18. LEASES
Accounting policy
The Group applies a single recognition and measurement approach for all leases, except for short-term leases and
leases of low-value assets. The Group recognises lease liabilities and right-of-use assets representing the right to use
the underlying assets.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is
available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses,
and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease
liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less
any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the lease term.
If ownership of the leased asset transfers to the Group at the end of the lease term or the cost re昀氀ects the exercise of
a purchase option, depreciation is calculated using the estimated useful life of the asset.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease
payments to be made over the lease term. The lease payments include 昀椀xed payments (including in-substance 昀椀xed
payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts
expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase
option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease
term re昀氀ects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or
a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or
condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease
commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement
date, the amount of lease liabilities is increased to re昀氀ect the accretion of interest and reduced for the lease payments
made. In addition, the carrying amount of lease liabilities is re-measured if there is a modi昀椀cation, a change in the lease
term, a change in the lease payments (e.g. changes to future payments resulting from a change in an index or rate used to
determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of certain leasehold property
and motor vehicles (i.e., those leases that have a lease term of 12 months or less from the commencement date and do
not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of o昀케ce
equipment that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are
recognised as expense on a straight-line basis over the lease term.
Lease modi昀椀cations
Where factors arise which give rise to a modi昀椀cation of a lease and to re-measure a lease liability, the Group calculates
the required re-measurement based on the revised discounted lease payments under the modi昀椀ed lease agreement
with the lessor. Any re-measurement adjustments identi昀椀ed are recognised with a corresponding entry against the
carrying value of the right of use asset unless the lease is being fully terminated where any gain or loss is recognised in
pro昀椀t or loss.
Nature of the leased assets
The property assets under lease are o昀케ces where our employees work. O昀케ce equipment includes photocopiers, water
coolers and software.
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RWS Holdings plc — Annual Report 2023 NOTES TO THE CONSOLIDATED STATEMENTS
