Page 99 - KELAG Annual Report 2019

is remeasured using recognised financial methods. Leases in the KELAG Group primarily relate to
agreements for the use of (parts of) buildings, land, lines and vehicles.

There are simplification options for short-term leases and leased assets of low value, for which
IFRS 16 provides recognition exemptions. The KELAG Group makes use of the two practical
expedients and therefore continues to recognise the lease payments from the contracts
concerned through profit or loss. A lease is considered to be short-term when the contractual
term does not exceed 12 months or the remaining contractual term as of the date of initial
application does not exceed 12 months. Leases of low-value assets generally exist in the KELAG
Group when the new value of the underlying asset does not exceed approximately EUR 5k.

Furthermore, the KELAG Group made use of the option to not perform an impairment test of
leases. Instead, it drew on the assessment of provisions from onerous contracts; there was no
resulting adjustment to the right-of-use assets. A uniform discount rate was used for the first-time
application to portfolios of similar leases. In accordance with the option available, the KELAG
Group also did not reassess whether or not a contract constitutes a lease as defined by IFRS 16 if
this already existed at the time of first-time application, but instead drew on the previous
classification pursuant to IAS 17 or IFRIC 4 for these contracts. The KELAG Group also opted not to
voluntarily apply IFRS 16 to leases of intangible assets.

Within the KELAG Group, IFRS 16 was applied for the first time with retrospective effect in the
financial year 2019. The cumulative adjustment amounts were recorded as of 1 January 2019. The
leases within the KELAG Group that are now to be recognised by the lessee totalled around
EUR 12.2m as of 1 January 2019; around EUR 0.9m relates to discounting, although the
undiscounted obligation from the newly recognised lessee contracts made up around EUR 13.1m
as of 1 January 2019. In the statement of financial position, right-of-use assets are included in the
line items where the assets underlying the leases would also have been presented. Lease liabilities
are presented in financial liabilities.

The weighted average incremental borrowing rate for all newly recognised leases under IFRS 16
as of 1 January 2019 was roughly 0.86%.