NOTES TO THE FINANCIAL STATEMENTS
Note 16: Leases The Group leases a warehouse and an office space. Rental contracts are typically made for fixed periods of 1 to 6 years but may have extension options. Lease terms are negotiated on an individual basis and contain a wide range of terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Until the 2020 financial year, leases of property, plant & equipment were classified as either finance leases or operating
leases. From 1 July 2019, leases are recognised as a right-of-use asset and a lease liability. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease Liabilities Lease liabilities include the net present value of the relevant lease payments.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases that relate to building premises, the entity’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit and 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.
Right-of-use Assets Right-of-use assets are measured at cost comprising the following: the amount of the initial measurement of the lease liability restoration costs
Extension options Extension options are included in building premises leases. The extension options held are exercisable only by the Group and not by the lessor. Extension options are only included in the lease term if the lease is reasonably certain to be extended.
I GO VITA GROUP LIMITED ANNUAL REPORT 2020-2021 60
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