CSL Ltd Annual Report 2020

CSL Limited Annual Report 2020 102 Notes to the Financial Statements As at 1 July 2019: • Right-of-use assets of $926mwere recognised and presented separately in the balance sheet. The right-of-use-asset at the time of adoption was the carrying amount as if the Standard had been applied since the commencement date, discounted using the Group’s incremental borrowing rate at the date of initial application. • Lease liabilities of $1,004mwere recognised based on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application and included under interest bearing liabilities. • Trade and other payables of $29m related to previous operating leases were derecognised. • Deferred tax liabilities decreased by $9m because of the deferred tax impact of the changes in assets and liabilities. • Finance lease assets and liabilities of $11mwere removed and included in right-of-use assets and liabilities. • Asset retirement obligations of $25mwere recorded. • The net effect of these adjustments had been adjusted to Retained earnings ($65m). The lease liabilities as at 1 July 2019 can reconciled to the operating lease commitments as of 30 June 2019 as follows: Operating Lease Commitments Reconciliation US$m Operating lease commitments as at 30 June 2019 735 Weighted Average Incremental Borrowing Rate 2.52% Discounted Operating Lease Commitments as at 1 July 2019 669 Add: Commitments relating to leases previously classified as finance leases 11 Payments in optional extension periods not recognised as at 30 June 2019 324 Lease Liabilities as at 1 July 2019 1,004 For the year ended 30 June 2020 included in the statement of income is depreciation of right-of-use assets of $70.9m and interest expense of $26.0m. Expense for these leases would have been recorded under rent expense prior to the adoption of AASB 16. After adoption of AASB 16, the Group’s cash flows fromoperating activities include only payments for the interest portion of lease payments (included in borrowing costs paid) and cash flows from financing include repayment of the principal portion of the lease liabilities. Below are the new accounting policies of the Group upon adoption of AASB 16: Right-of-use assets The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any restoration obligations, accumulated depreciation, or impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised less any lease incentives received and initial direct costs. Unless the Group is reasonably certain to obtain ownership of the underlying asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to annual impairment assessment as discussed in Note 8 – PPE (Property, Plant & Equipment). Based on each lease category, the following table summarises the range of useful lives (i.e. lease terms) for AASB 16 Leases: ROU assets useful lives Plasma Centres Office Leases Warehouse Leases Land Leases Vehicles Years Years Years Years Years Minimum 3 <1 1 4 3 Maximum 40 30 35 101 4 Average 25 8 13 60 3.5 Lease liabilities At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as an expense in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses the incremental borrowing rate of the lessee at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, such as a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset. The following table summarises the maturity profile of the Group’s lease liabilities based upon contractual undiscounted payments: Repayable in Less than 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years More than 5 years Total US$m US$m US$m US$m US$m US$m US$m As at 30 June 2020 91.0 88.8 84.6 82.1 76.2 891.0 1,313.7