Investor Presentaiton
HKAS 1.51(a)
HKAS 1.49
HK Listco Ltd
Financial statements for the year ended 31 December 2023
HKFRS 16.34-35
The right-of-use asset recognised when a lease is capitalised is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for any lease payments made at or before
the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle
and remove the underlying asset or to restore the underlying asset or the site on which it is located,
less any lease incentives received. The right-of-use asset is subsequently stated at cost less
accumulated depreciation and impairment losses (see notes 1(k) and 1(n)(iii)), except for the
following types of right-of-use asset⁹4:
right-of-use assets that meet the definition of investment property are carried at fair value (see
note 1(j)); and
right-of-use assets related to leasehold land and buildings where the group is the registered
owner of the leasehold interest are carried at fair value (see note 1(k)); and
right-of-use assets related to interests in leasehold land where the interest in the land is held as
inventory are carried at the lower of cost and net realisable value (see note 1(o)).
Refundable rental deposits are accounted for separately from the right-of-use assets in accordance
with the accounting policy applicable to investments in non-equity securities carried at amortised cost
(see notes 1(g)(i), 1(aa)(ii)(c) and 1(n)(i)). Any excess of the nominal value over the initial fair value of
the deposits is accounted for as additional lease payments made and is included in the cost of right-of-
use assets.
The lease liability is remeasured when there is a change in future lease payments arising from a change
in an index or rate, if there is a change in the group's estimate of the amount expected to be payable
under a residual value guarantee, or if the group changes its assessment of whether it will exercise a
purchase, extension or termination option. When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in
profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The lease liability is also remeasured when there is a lease modification, which means a change in the
scope of a lease or the consideration for a lease that is not originally provided for in the lease contract,
if such modification is not accounted for as a separate lease. In this case, the lease liability is
remeasured based on the revised lease payments and lease term using a revised discount rate at the
effective date of the modification. The only exceptions are rent concessions that occurred as a direct
consequence of the COVID-19 pandemic and met the conditions set out in paragraph 46B of HKFRS 16
Leases. In such cases, the group has taken advantage of the practical expedient not to assess whether
the rent concessions are lease modifications, and recognised the change in consideration as negative
variable lease payments in profit or loss in the period in which the event or condition that triggers the
rent concessions occurred.
In the consolidated statement of financial position, the current portion of long-term lease liabilities is
determined as the present value of contractual payments that are due to be settled within twelve
months after the reporting period. 230
HKFRS 16.34-35
94 Paragraphs 34 to 35 of HKFRS 16 state that a lessee applies an alternative measurement basis in the following circumstances:
(a) when the entity has elected the fair value model for measuring investment properties under HKAS 40, then the entity must
measure any right-of-use asset that meets the definition of investment property at fair value; or
(b) when the entity applies the revaluation model to a class of property, plant or equipment under HKAS 16, then the entity
may elect to apply that revaluation model to all of the right-of-use assets that relate to same class of property, plant or
equipment.
HKFRS 16 does not explicitly refer to the situation when the leased asset is being held as inventory, such as in the case of
leasehold land held by a property developer in Hong Kong. Consistent with the approach taken to the subsequent measurement
of other right-of-use assets with reference to their use in the business, when leased assets are held as part of inventory for sale
in the ordinary course of business, one of the acceptable policies for subsequent measurement would be to recognise any
consumption of the lease by reference to the net realisable value of the property in accordance with HKAS 2. Alternatively, the
leased assets may be depreciated from the commencement date on a straight-line basis and the depreciation charge would be
expensed unless construction activities are in progress (in which case the charge would be capitalised as part of the cost of the
inventory). Whichever policy is adopted, it should be applied consistently to all such leased assets held as part of inventory and
from one period to the next.
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