Accounting policy

General

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards incidental to ownership. All other leases are classified as operating leases.

Agreements not in the legal form of a lease contract are analyzed in accordance with IFRIC 4 Determining whether an Arrangement contains a Lease to determine whether or not they contain a leasing contract to be accounted for in accordance with IAS 17 Leases.

Finance leases – lessee

On commencement of the lease, assets held under finance leases are initially recognized as assets of the Group at their fair value, or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the lease.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to produce a constant periodic rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Group’s general policy on borrowing costs (see above). Contingent rentals arising under finance leases are recognized as expenses in the periods in which they are incurred.

Operating leases – lessee

Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Finance leases

In € million

 

2016

 

2015

Net carrying amount of finance leases included in the table above

 

 

 

 

Land and buildings

 

5

 

2

Fixtures and equipment

 

47

 

51

Total

 

53

 

53

Finance lease obligations

In € million

 

Minimum lease payments

 

2016

 

2015

Amounts payable under finance leases:

 

 

 

 

Within one year

 

11

 

10

In years two to five inclusive

 

34

 

33

Beyond five years

 

88

 

84

Less: future finance charges

 

(81)

 

(74)

Present value of minimum lease payments of finance leases

 

52

 

53

Amount due for settlement within 12 months

 

11

 

10

Amount due for settlement after 12 months

 

122

 

117

Operating lease obligations

In € million

 

2016

 

2015

Total minimum lease payments under operating leases recognized in the income statement of the year

 

107

 

81

In € million

 

2016

 

2015

Within one year

 

96

 

82

In years two to five inclusive

 

281

 

250

Beyond five years

 

113

 

113

Total of future minimum lease payments under non-cancellable operating leases

 

490

 

444

Operating leases relate mainly to offices, warehouses, transportation and IT equipment.