Annual Report 2019

150 Transport International Holdings Limited 2019 Annual Report Notes to the Financial Statements (Expressed in Hong Kong dollars unless otherwise indicated) 1 Significant accounting policies (continued) (c) Changes in accounting policies (continued) b. Lessee accounting and transitional impact HKFRS 16 eliminates the requirement for a lessee to classify leases as either operating leases or finance leases, as was previously required by HKAS 17. Instead, the Group is required to capitalise all leases when it is the lessee, including leases previously classified as operating leases under HKAS 17, other than those short-term leases and leases of low-value assets which are exempt. As far as the Group is concerned, these newly capitalised leases are primarily in relation to property, plant and equipment as disclosed in note 30(b). For an explanation of how the Group applies lessee accounting, see note 1(l)(i). At the date of transition to HKFRS 16 (i.e. 1 January 2019), the Group determined the length of the remaining lease terms and measured the lease liabilities for the leases previously classified as operating leases at the present value of the remaining lease payments, discounted using the relevant incremental borrowing rates at 1 January 2019. The weighted average of the incremental borrowing rates used for determination of the present value of the remaining lease payments was 2.7%. To ease the transition to HKFRS 16, the Group applied the following recognition exemption and practical expedients at the date of initial application of HKFRS 16: (i) the Group elected not to apply the requirements of HKFRS 16 in respect of the recognition of lease liabilities and right-of-use assets to leases for which the remaining lease term ends within 12 months from the date of initial application of HKFRS 16, i.e. where the lease term ends on or before 31 December 2019; and (ii) when measuring the lease liabilities at the date of initial application of HKFRS 16, the Group applied a single discount rate to a portfolio of leases with reasonably similar characteristics (such as leases with a similar remaining lease term for a similar class of underlying asset in a similar economic environment). The following table reconciles the operating lease commitments as disclosed in note 30(b) as at 31 December 2018 to the opening balance for lease liabilities recognised as at 1 January 2019: 1 January 2019 $’ 000 Operating lease commitments at 31 December 2018 8,628 Less: commitments relating to leases exempt from capitalisation: – short-term leases and other leases with remaining lease term ending on or before 31 December 2019 (1,444) 7,184 Less: total future interest expenses (232) Total lease liabilities recognised at 1 January 2019 6,952