NWG // FINANCIAL INFORMATION // THE GROUP
.
Leased assets
Accounting policies
The Group assesses at contract inception whether an agreement is , or contains , a lease . That is , if the agreement conveys the right to control the use of an identified asset for a period of time in exchange for considerations . The Group once again assesses if an agreement is or contains a lease if the terms and conditions of the agreement change .
Lease agreements are recognized as right-of-use assets as well as interest-bearing lease liabilities in the Group ´ s balance sheet . Lease liabilities are recognized within long-term and short-term interest-bearing liabilities in the Group ´ s balance sheet and are measured at the present value of future lease payments . In calculating the present value of lease payments , the Group uses its incremental borrowing rate at the lease commencement date if there does not exist an implicit rate in the agreement . The lease payments include fixed payments , variable lease payments that depend on an index or a rate and amounts expected to be paid under residual value guarantees .
Right-of-use assets are presented as tangible fixed assets and are measured at cost , less accumulated depreciations and , where applicable , impairment losses . The cost of a right-of-use asset contains the initial amount of the lease liability adjusted for any lease payments made before the commencement date , less any lease incentives received . Moreover , any initial direct expenses incurred are included as well . The leased asset is depreciated on a straight-line basis over lease term , or over the estimated useful life if the ownership is transferred to the New Wave Group at the end of the lease term .
The Group applies the short-term lease practical expedient to its short-term leases ( i . e . those leases that have a lease term of twelve months or less from the commencement date ). It also applies the lease of low-value assets practical expedient to leases that are considered to be low value . Lease payments on short-term leases and leases of low-value assets are recognized as expenses on a straight-line basis over the lease term . Variable lease payments that do not depend on an index or a rate are recognized as expenses in the period in which they occur . During the year , the Group has applied the rent concession practical expedient introduced in IFRS 16 in response to the COVID-19 pandemic . The rent concessions are recorded as variable leasing payments .
The Group has primarily lease agreements related to office premises , warehouses and cars . The lease period varies depending on type of asset and country . For real estate leases the lease period varies from 3-10 years up to 15 years . For equipment , tools and installations ( including cars ) the lease period varies between 2-6 years .
Key estimates and assumptions
Assessments are made to determine the lease term and the interest rate used for discounting of future cash flows which affect the measurement of the lease liability and the right-of-use asset . The lease term is determined as the non-cancellable term of the lease , together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised , or any periods covered by an option to terminate the lease , if it is reasonably certain that the option to extend will not be exercised . Extension and termination options are mainly related to real estate leases . Assessments are made to evaluate whether it is reasonably certain to exercise the option to extend the lease or to terminate the lease . That is , all relevant factors that create an economic incentive to exercise either the extension or termination are considered . The renewal periods for real estate leases with longer non-cancellable periods ( approximately 10 to 15 years ) are not included as part of the lease term as these are not reasonably certain to be exercised .
Assessments are also required to determine the interest rate when discounting future lease payments . The lease payments are discounted by using a rate reflecting what New Wave Group would have to pay to borrow funds to acquire a similar asset . The Group has used its incremental borrowing rate when discounting lease payments since the interest rate implicit in the agreements is not known .
086 // ANNUAL REPORT