Notes to the financial statements
14. Leases continued 14.3 Lease expenses included in profit or loss
2023 $M
2022 $M
0.2 1.6
Short-term leases Interest on leases
0.2 1.3
14.4 Lease cashflows included in statement of cash flows
2023 $M
2022 $M
12.5
Total cash outflow in relation to leases
11.8
Policies
Right of use (“ROU”) assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of ROU assets includes the amount of lease liabilities recognised, initial direct costs incurred, restoration obligations, and lease payments made at or before the commencement date less any lease incentives received. ROU assets are subsequently depreciated using the straight-line method from the commencement date to the end of the lease term.
Key accounting judgements Determining the term of a perpetual lease and a lease with renewal options (single or multiple) can have a material impact on the value of the ROU asset and associated lease liability. The group has two perpetual leases relating to two LPG storage and transportation sites at Lyttelton and Dunedin with no expiry dates. Management have determined the lease term for the perpetual leases be the same as the lease for the Port Taranaki LPG import facility, on the basis that economic benefits from the perpetual leases are requisite on the group having a continuing right to use the site and associated facilities at Port Taranaki. The end of the lease term for the lease at Port Taranaki is 30 September 2044.
For leases with renewal options, management include one to all available renewal periods in the lease term if it is reasonably certain that the renewal option or options will be exercised. In making this judgement management consider the non-cancellable period of the lease, other leases or assets associated with the lease in question, and other economic factors such as availability of similar leases in the market and costs to identify and negotiate another lease if not renewed. Several property leases in the group’s portfolio of leases contain renewal options. The group has estimated the impact from potential future lease payments, should it exercise these extension options, to be an increase of $32.4 million (2022: $11.9 million) in the group’s lease liability. During the year, the group’s assumption relating to its main property lease was updated, which resulted in a reduction in the group right of use assets and lease liabilities of $2.8 million. This reduction is included in disposals for the year ended 30 June 2023.
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