NTUC Income AR 2019

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 34. ADOPTION OF NEW STANDARDS (CONTINUED) Leases classified as operating lease under FRS 17 Previously, the Group classified property leases as operating leases under FRS 17. On transition, for these leases, lease liabilities were measured at the present value of the remaining lease payments, discounted at respective lessee entities’ incremental borrowing rates applicable to the leases as at 1 January 2019. ROU assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payment. The Group has tested its ROU assets for impairment on the date of transition and has concluded that there is no indication that the ROU assets are impaired. The Group used a number of practical expedients when applying FRS 116 to leases previously classified as operating leases under FRS 17. In particular, the Group: • did not recognise ROU assets and liabilities for leases for which the lease term ends within 12 months of the date of initial application; • did not recognise ROU assets and liabilities for leases of low value assets (e.g. office equipment) • excluded initial direct costs from the measurement of the ROU asset at the date of initial application; and • used hindsight when determining the lease term As a lessor The Group leases out its investment property and has classified these leases as operating leases. The Group is not required to make any adjustments on transition to FRS 116 for leases in which it acts as a lessor. The Group has applied FRS 115 Revenue from Contracts with Customer to allocate consideration in the contract to each lease and non-lease component. Impact on financial statements Impact on transition When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease payments using the applicable incremental borrowing rates at 1 January 2019. The weighted-average applied is 2.8%. 1 January 2019 $’000 Operating lease commitments at 31 December 2018 as disclosed under FRS 17 in the Group’s consolidated financial statements 30,151 Less: Lease committed but not commenced at 31 December 2018 (22,211) 7,940 Discounted using the incremental borrowing rate at 1 January 2019 4,608 Add: Extension options reasonably certain to be exercised 4,940 Lease liabilities recognised at 1 January 2019 (Note 18) 9,548 ANNUAL REPORT 2019 149