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122 Notes to the Consolidated Financial Statements 3.5 Leases (continued) 3.5.2 Lease liabilities Movement: Carrying amount at start of period Additions Acquisition of businesses¹ Terminations Remeasurements Transfer of liabilities to held for sale Interest expense Payments for the interest component of lease liabilities Repayment of the principal component of lease liabilities 3.5 Leases (continued) Assets and liabilities 3 123 Annual Report 2023 Woolworths Group 2023 $M 2022 $M 12,016 12,471 352 570 45 369 (26) (44) 204 616 (8) 542 542 (542) (542) (1,067) (1,019) (29) • 1 12,471 1,572 Significant Accounting Policies The Group assesses whether a contract is, or contains, a lease at inception of the contract. A lease conveys the right to direct the use of and obtain substantially all of the economic benefits from an identified asset for a period of time in exchange for consideration. A lease liability and corresponding lease asset are recognised at commencement of the lease. Lease liabilities Lease liabilities are measured at the present value of lease payments during the lease term that are not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be determined, at the Group's incremental borrowing rate specific to the lease term. Lease payments (excluding non-lease components) include: . Fixed payments (including in-substance fixed payments), less any lease incentives receivable; Variable lease payments that are based on an index or a rate; 1 highlights Performance 2 Other Carrying amount at end of period Current Non-current 11,980 1,637 10,343 10,899 Carrying amount at end of period 11,980 12,471 1 Acquisition of businesses comprises $44 million of lease liabilities relating to the acquisition of Shopper and $1 million relating to other individually immaterial acquisitions (2022: Acquisition of PFD). MATURITY PROFILE OF CONTRACTUAL UNDISCOUNTED CASH FLOWS One year or less One year to two years Two years to five years Five years to 10 years Over 10 years Total undiscounted lease liabilities COMMITMENTS FOR LEASES NOT YET COMMENCED 2023 2022 $M $M 1,689 1,643 1,507 1,474 3,051 3,014 6,003 6,270 2,704 3,456 14,954 15,857 As at 25 June 2023, the Group had committed to leases which had not yet commenced. Accordingly, these lease contracts are not included in the calculation of the Group's lease liabilities. The Group has estimated that the potential future lease payments for these lease contracts as at the end of the financial period, including the Group's contracts relating to its Moorebank National and Regional Distribution Centres, would result in an increase in undiscounted lease liabilities of $1,623 million (2022: $1,669 million). 3.5.3 Other amounts recognised 2022 2023 $M $M Consolidated Statement of Profit or Loss (included in branch and administration expenses) Variable lease payments not included in the measurement of lease liabilities¹ Expense relating to short-term leases 115 110 12 16 Consolidated Statement of Cash Flows (included in payments to suppliers and employees) Payments for short-term leases, service components of leases, and variable lease payments 723 625 1 Variable lease payments represent less than 5% of total lease payments (2022: less than 5% of total lease payments). • Amounts expected to be payable by the Group under residual value guarantees; • Exercise price of a purchase option that the Group is reasonably certain to exercise; and . Payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option. Lease liabilities are subsequently measured at amortised cost using the effective interest rate method. When there is a change in lease term or a change in future lease payments, lease liabilities are remeasured, with a corresponding adjustment to lease assets. Lease assets Lease assets are initially measured at cost comprising the initial lease liability, any lease payments made at or before the commencement date (less any lease incentives received), any initial direct costs, and restoration costs. Lease assets are subsequently depreciated on a straight-line basis over the shorter of the lease term or the useful life of the underlying asset. Lease assets are tested for impairment in accordance with the policy for impairment of non-financial assets as disclosed in Note 3.10. Short-term leases Short-term leases are those with a lease term of 12 months or less. The costs associated with these leases are recognised as an expense in the Consolidated Statement of Profit or Loss as incurred. Holdover leases In assessing whether the Group is reasonably certain to extend or renew a lease in holdover, the Group considers all relevant facts and circumstances that create an economic incentive to remain in the leased premises and whether a lease asset and lease liability should be recognised. Variable lease payments The Group has some property leases, which contain variable payment terms that are linked to sales generated from a store and are recognised in the Consolidated Statement of Profit or Loss in the period in which it is incurred. Non-lease components The Group separates the non-lease components for property leases based on a residual method using property outgoings market data and separates the non-lease components for other leases based on the individual contract breakdown of these costs or otherwise best estimate of these costs. Non-lease components of lease payments are recognised as an expense in the Consolidated Statement of Profit or Loss as incurred and include items such as embedded property outgoings, repairs and maintenance. review Business 3 Report Directors' 4 Report Financial LO Other information

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