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|
|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|
|At 31 December||2 173||1 900|
|Thereof short-term||776||1 065|
|Thereof long-term||1 397||835|
|in thousand EUR||Leased buildings
|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|
|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||–|
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.