22. Leasing

As of 31 December, the reconciliation for the new lease liabilities is as follows:

in thousand EUR   1 January 2019
Minimum lease payments under operating leases as of 31 December 2018   227
Recognition addition of operating leases   415
Recognition exemption    
 for short-term leases   –335
 for leases of low value assets   –3
Effect from discounting at the incremental borrowing rate as of 1 January 2019   –31
Lease liabilities additionally recognized based on IFRS 16 as of 1 January 2019   273
Liabilities from finance leases as of 31 December 2018   1 900
Total liabilities from leases as of 1 January 2019   2 173

The Group has entered into several leases for vehicles and machinery. The leases have lifespans of three to four years.

The development of the lease liabilities is as follows:

in thousand EUR   2019   2018
At 1 January   1 900   2 037
Adjustment due to IFRS 16   273  
At 1 January (adjusted)   2 173  
Additions   1 514   1 082
Increase to reflect interest on leases   65  
Disposals   –1 362   –1 219
Lease payments   –217  
At 31 December   2 173   1 900
Thereof short-term   776   1 065
Thereof long-term   1 397   835
Leased assets
in thousand EUR   Leased buildings
and building
  Leased PPE
At 31 December 2018     2 559   2 559
Adjustment due to IFRS 16   131   500   631
At 1 January 2019   131   3 059   3 190
Additions     1 166   1 166
Depreciation   –29   –1 077   –1 106
Currency effects     0   0
At 31 December 2019   102   3 148   3 250

As of 31 December, other operating expenses contain the following expenses in connection with leases:

in thousand EUR   2019   2018
Expenses for short-term leases   335  
Expenses for leases of low value   1  
Total operating lease expenses   336  
Accounting policies

For the transition to IFRS 16, the modified retrospective approach was applied. The previous years’ figures were not restated and still disclosed according to IAS 17. The requirements of IFRS 16 were applied to those leases as per 1 January 2019.

Policy from 1 January 2019 (according to IFRS 16)

Each contract has to be assessed at inception, whether it constitutes or contains a lease. This is given, when the contract conveys the right to control the use of the identified asset for the period of use in exchange for substantially all of the economic benefits. Precious Woods elected to apply the recognition exemptions to short-term leases and low value leases. For such leases no right-of-use asset and no lease liability are recorded, instead the lease payments are recognized as operating expenses.

At the commencement date, the lease liability is measured at the present value of future lease payments during the fix period of the lease. Incremental borrowing rates are used for the discount rates. The right-of-use asset corresponds initially to the lease liability, plus any initial direct costs, advance payments and dismantling or removing costs. The right-of-use asset is depreciated on a straight-line basis over the shorter of the lease term or the useful life. If at the end of the lease term the ownership of the leased asset is transferred to the lessee or the lessee is reasonably certain to exercise the purchase option, then the right-of-use asset has to be depreciated according to the useful life defined for property, plant and equipment.

Policy until 31 December 2018 (according to IAS 17)

Leasing of assets, in which substantially all the risks and rewards incidental to ownership are transferred to the lessee, are classified as finance leases. Finance leases are initially recognized in the statement of financial position at the lower of the fair value of the leased assets, or the present value of the minimal lease payments. The leased asset is depreciated over the shorter of the useful life or the lease term. The corresponding financial obligations are recorded as liabilities. Leased assets, in which substantially all risks and rewards incidental to ownership are effectively held and used by the lessor, are classified as operating leases. Lease payments under an operating lease are recorded in the statement of profit or loss on a straight-line basis over the lease term.