NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2024 (CURRENCY – SINGAPORE DOLLARS UNLESS OTHERWISE STATED) E5 Commitments and contingent liabilities (continued) Recognition and measurement (continued) As a lessee (continued) These right-of-use assets are subsequently depreciated using the straight-line method from the 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. Right-of-use assets (except for those which meets the definition of an investment property) are presented in Note C2. The lease liability is initially measured at the present value of the lease payments discounted using the implicit rate in the lease, if the rate can be readily determined. If that rate cannot be readily determined, the Group shall use its incremental borrowing rate. Lease payments include the following: – Fixed payment (including in-substance fixed payments), less any lease incentives receivables; – Variable lease payment that are based on an index or rate, initially measured using the index or rate as at the commencement date; – Amount expected to be payable under residual value guarantees; – The exercise price of a purchase option if the Group is reasonably certain to exercise the option; and – Payment of penalties for terminating the lease, if the lease term reflects the Group exercising that option. For contracts that contain both lease and non-lease components, the Group allocates the consideration to each lease component on the basis of the relative stand-alone price of the lease and non-lease components. The Group has elected to not separate lease and non-lease components for property leases and account these as one single lease component. Lease liability is measured at amortised cost using the effective interest method. Lease liability shall be remeasured when: – There is a change in future lease payments arising from changes in an index or rate; – There is a change in the Group’s assessment of whether it will exercise an extension option; or – There is modification in the scope or the consideration of the lease that was not part of the original terms. Lease liability is remeasured with a corresponding adjustment to the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. Short-term and low value leases The Group has elected to not recognise right-of-use assets and lease liabilities for short-term leases that have lease terms of 12 months or less and leases of low value, except for sublease arrangements. Lease payments relating to these leases are expensed to profit or loss on a straight-line basis over the lease term. 230 ST ENGINEERING | ANNUAL REPORT 2024
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