Page 106 - HRC_Annual_Report_2023

104 About HRC Value Creation Management Discussion Leadership
& Analysis

NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

2 SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.6 LEASES (continued)

Accounting by lessee (continued)
Right-of-use (“ROU”) assets
(a) Initial measurement of ROU assets
ROU assets are initially measured at cost comprising the following:
• The amount of the initial measurement of lease liability;
• Any lease payments made at or before commencement date less any lease incentive received;
• Any initial direct costs; and
• Decommissioning or restoration costs.
(b) Subsequent measurement of ROU assets
ROU assets that are not investment properties are subsequently measured at cost, less accumulated depreciation
and impairment loss (if any). The ROU assets are generally depreciated over the shorter of the asset’s useful life
and the lease term on a straight-line basis. If the Company is reasonably certain to exercise a purchase option,
the ROU asset shall be depreciated over the underlying asset’s useful life. In addition, the ROU assets are adjusted
for certain remeasurements of the lease liabilities. The ROU assets are presented as a separate line in the statement
of financial position.
Lease liabilities
(a) Initial measurement of lease liabilities
Lease liabilities are initially measured at the present value of the lease payments that are not paid at that date.
Lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined,
the lessee’s incremental borrowing is used. This is the rate that the individual lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value to the ROU assets in a similar economic environment with similar
terms, security and conditions.

The lease payments include the following:
• Fixed payments (including in-substance fixed payments), less any lease incentive receivable;
• Variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the
commencement date;
• Amounts expected to be payable by the Company under residual value guarantees;
• The exercise price of a purchase and extension options if the Company is reasonably certain to exercise that option;
and
• Payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option.
Lease payments are allocated between principal and finance costs. The finance cost is charged to profit or 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.

The Company presents the lease liabilities as a separate line item in the statement of financial position.
Interest expense on the lease liability is presented within the finance cost in profit or loss in the statement of
comprehensive income.