Investor Presentaiton
HKAS 1.51(a)
HKAS 1.49
HK Listco Ltd
Financial statements for the year ended 31 December 2023
(ii)
Other properties leased for own use
HKFRS 16.59(a)
HKFRS 16.59(b)(ii),
B50
The group has obtained the right to use other properties as its warehouses and retail stores through
tenancy agreements. The leases typically run for an initial period of [●] to [•] years. Lease payments
are usually increased every (•) years to reflect market rentals.
Some leases include an option to renew the lease for an additional period after the end of the
contract term. Where practicable, the group seeks to include such extension options exercisable by
the group to provide operational flexibility. The group assesses at lease commencement date
whether it is reasonably certain to exercise the extension options. If the group is not reasonably
certain to exercise the extension options, the future lease payments during the extension periods are
not included in the measurement of lease liabilities. The potential exposure to these future lease
payments is summarised below:176
HKFRS 16.59(b)(i),
B49
HKFRS 16.59 &
B48-B52
176
Warehouses
Hong Kong
Retail stores Hong Kong
Lease liabilities
recognised
(discounted)
Potential future lease
payments under
extension options not
included in lease
liabilities (undiscounted)
2023
2022
2023
2022
$'000
$'000
$'000
$'000
7,186
7,929
3,000
1,400
4,535
6,606
4,800
4,800
The group leased a number of retail stores which contain variable lease payment terms that are
based on sales generated from the retail stores and minimum annual lease payment terms that are
fixed. These payment terms are common in retail stores in Hong Kong where the group operates. In
2022 the group received rent concessions in the form of a discount on fixed payments as a result of
severe social distancing and travel restriction measures introduced to contain the spread of COVID-
19. The amount of fixed and variable lease payments for the year is summarised below:176
In addition to the quantitative disclosure as required by paragraphs 53 to 58 of HKFRS 16, paragraph 59 of HKFRS 16 requires a
lessee to disclose additional qualitative and quantitative information about its leasing activities necessary to give a basis for users to
assess the effect on the financial statements. In determining whether additional information about leasing activities is necessary,
paragraph B48 of HKFRS 16 states that the information is likely to be relevant if it helps users of financial statements to understand:
the flexibility provided by leases (for example, if the entity can reduce its exposure by exercising termination options or
renewing leases with favourable terms and conditions);
restrictions imposed by leases (for example, if the lessee requires the entity to maintain particular financial ratio);
sensitivity of reported information to key variables (for example, if lease payments are linked to sales or usage volume or other
variables);
exposure to other risks arising from leases (for example, residual value risk); and
deviations from industry practice (for example, unusual lease terms and conditions that affect a lessee's lease portfolio, or sale
and leaseback transactions).
Paragraph 59 of HKFRS 16 provides examples of information that the entity should consider disclosing, including variable lease
payments, extension and termination options, residual value guarantees and sale and leaseback transactions. Paragraphs B49 to B52
of HKFRS 16 expands to give further examples of additional information in respect of these items. In this illustration, HK Listco
determines that the information about flexibility provided by the extension options and the variability of turnover rent are relevant
to users of financial statements and are not available elsewhere in this illustrative annual report. Entities should use their judgement
to determine what additional information is relevant in view of their circumstances and therefore requires disclosure.
In addition, the information about the nature of rent concessions (e.g. one-off rent reductions, rent waivers or deferrals of lease
payments), if material, would be relevant to users of financial statements regardless of whether a lessee applies the practical
expedient relating to COVID-19 in paragraph 46A of HKFRS 16.
111
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