Annual report 2019

89

of the Statement of Financial Position or when the execution of the plan has commenced.

payments arising from options reasonably certain to be exercised.

Provisions for warranties are recognized based on the best estimate of the expected cash outflows or cost of repair to settle contractually agreed warranties during the defect notification period for completed projects. The carrying amount of these provisions is estimated based on common industry practice and the Group’s experience with warranty claims for relevant projects. A provision for onerous contracts, including contracts with customers, is recognized when the expected benefits to be derived by the Group from a contract are lower than the remaining unavoidable cost of meeting its obligations under the contract. In accordance with the Group’s policy and applicable legal requirements, a provision for site restoration in respect of contaminated land, and the related expenses, is recognized if the land is contaminated. LEASES ACCOUNTING POLICY APPLICABLE FROM 1 JANUARY 2019 For any new contracts the Group enters into as a lessee, the Group considers whether a contract is, or contains a lease. A lease is a contract that conveys the right to use an asset (the underlying asset) for a period of time in exchange for a consideration. At commencement date of the lease, the Group recognises a right-of-use asset and a lease liability on the balance sheet. Right-of-use assets The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received). The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group revaluates the right-of-use asset for remeasurements of the lease liability. Real estate is depreciated over periods ranging from 3 to 10 years, vessels over periods ranging from 2 to 5 years and other right-of-use assets over periods ranging from 2 to 5 years. Lease liability At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or an incremental borrowing rate as determined by the Group. Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and

Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. Short-term lease and lease with a low value of the underlying asset The payments of short-term leases (duration is equal to or less than 12 months) and leases of low-value underlying assets (equal to or less than USD 5.000) are expensed in profit or loss on a straight-line basis over the lease term. Instead of recognising a right-of-use asset and lease liability. ACCOUNTING POLICY APPLICABLE BEFORE 1 JANUARY 2019 Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset is classified as a tangible fixed asset and is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating leases which are not recognized in the Group’s consolidated statement of financial position and are disclosed as part of the other commitments and contingent liabilities. Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding lease liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the lease liability. TRADE AND OTHER PAYABLES Trade and other payables are recognized initially at fair value and subsequently at (amortized) cost. If the difference between the discounted and nominal value is not material, trade and other payables are stated at cost. is highly probable that they will be recovered primarily through sale rather than through continuing use. Such assets are generally measured at the lower of their carrying amount and fair value less costs to sell. Liabilities related to the assets held for sale are separately recognized as liabilities held for sale. Once classified as held for sale, intangible assets and property, plant and equipment are no longer amortized or depreciated. For a joint venture or associate held for sale, the use of the equity method is discontinued. ASSETS HELD FOR SALE Assets are classified as held for sale (disposal group) when it

ANNUAL REPORT 2019 – BOSKALIS A U O 9 -- BOSKALIS