Vetoquinol Universal Registration Document 2019

76   Vetoquinol  Universal Registration Document 2019  Financial report 6 CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements 6.5.15 Leases - IFRS 16 As of the transition date, most leases were classified as operating leases under IAS 17. Right-of-use assets were valued as of January 1, 2019, the transition date, at the discounted present value of future lease payments. The main changes arising from application of IFRS 16 are as follows: • recognition of a right-of-use asset amounting to €10.4 million as of December 31, 2019 (€10.4 million as of January 1, 2019) and a financial liability amounting to €10.7 million as of December 31, 2019 (€10.7 million as of January 1, 2019), and a €0.3 million reduction in shareholders’ equity arising from the discounting of leases to their present value; • lease expenses amounting to €4.9 million in respect of 2019 were eliminated. To offset this reduction, depre- ciation charges of €4.8 million and interest charges of €160,000 were recognized for 2019. The principles are as follows: • the lease term corresponds to the non-cancelable lease period, unless the Group is reasonably certain to exercise the contractual extension or early termination options; • the discount rate applied to calculate the right-of-use asset and lease liability is determined in accordance with the incremental borrowing rate as of the begin- ning of the lease term; • measurement of liabilities at the present value of remaining rent payments, discounted to January 1, 2019 using the incremental borrowing rate of each lessee (per individual entity); • in the absence of a contractually defined implicit rate, the discount rate applied is the average 10-year incre- mental borrowing rate the lessee would have had to pay. The average discount rate for lease liabilities at January 1, 2019 was 1.7%. The average discount rate for new lease liabilities arising in 2019 was 2.2%. These discount rates correspond to the average rates weighted as per the amount of lease liabilities to which they relate. The main leases restated are real estate and transport vehicle leases. The Group applies the two exemptions provided for by IFRS 16, whereby short-term leases and leases of low-value assets are not recognized on the balance sheet. • Leases with a term of no more than 12 months. • Leases for low-value assets: leases for assets whose replacement value does not exceed USD 5,000. The following table shows right-of-use assets as of December 31, 2019 broken down by asset class. €000 Dec 31, 2019 Jan 1, 2019 Land 1 1 Buildings 6,712 7,414 Plant, machinery and equipment 26 114 Vehicles 3,469 2,642 Furniture, office equipment, hardware 178 245 TOTAL 10,386 10,416 Financial liabilities relating to leases amounted to €10,713 million as of January 1, 2019; the difference between this amount and the amount of off-balance sheet lease commitments at December 31, 2018 (€10,976 million) is analyzed as follows: €000 Non-cancelable lease commitments at 12/31/2018 10,976 Discounting (299) Other (additional term/leases) 36 LEASE LIABILITIES AT 1/1/2019 10,713