32. Leases
Group as lessee
The Group has lease contracts for rolling stock, real estate and other operating assets that are used in its operations. The Group’s obligations under the leases are safeguarded by the lessor's right to the ownership of the leased assets. Generally, the Group’s possibilities for subleasing the leased assets are restricted. There are various lease contracts that contain renewal and termination options. These are discussed in more detail below.
The Group also has certain lease contracts for machines with a lease term of 12 months or less and lease contracts for low value office equipment. The Group applies the recognition criteria for exemptions for ‘short-term leases’ and ‘leases of low-value assets’ for these lease contracts.
The carrying amounts of the recognised right-of-use assets and the changes during the period are stated below.
(in millions of euros) | Rolling stock | Real estate | Miscellaneous | Total |
Composition as at 1 January 2021 | ||||
Cost | 2,977 | 214 | 27 | 3,218 |
Accumulated depreciation and impairments | 1,254 | 86 | 13 | 1,353 |
Carrying amount as at 1 January 2021 | 1,723 | 128 | 14 | 1,865 |
Changes in 2021 | ||||
Additions | 255 | 15 | 8 | 278 |
Disposals | -1 | - | -1 | -2 |
Deconsolidation | -890 | - | - | -890 |
Depreciation and amortisation | -458 | -15 | -3 | -476 |
Impairment losses | -13 | - | - | -13 |
Reversal of impairment | - | - | - | - |
Exchange differences | 44 | 2 | - | 46 |
Other movements | 37 | -17 | -1 | 19 |
Total changes during the financial year | -1,026 | -15 | 3 | -1,038 |
Composition as at 31 December 2021 | ||||
Cost | 2,006 | 195 | 26 | 2,227 |
Accumulated depreciation and impairments | 1,309 | 82 | 9 | 1,400 |
Carrying amount as at 31 December 2021 | 697 | 113 | 17 | 827 |
Changes in 2022 | ||||
Additions | 121 | 35 | 2 | 158 |
Disposals | - | -30 | -2 | -32 |
Business acquisitions | 360 | 14 | - | 374 |
Held for sale | -615 | -32 | -14 | -661 |
Depreciation and amortisation | -169 | -13 | -1 | -183 |
Impairment losses | - | - | - | - |
Reversal of impairment | 5 | 7 | - | 12 |
Exchange differences | -34 | -2 | -1 | -37 |
Other movements | -1 | 2 | 2 | 3 |
Total changes during the financial year | -333 | -19 | -14 | -366 |
Composition as at 31 December 2022 | ||||
Cost | 473 | 160 | 3 | 636 |
Accumulated depreciation and impairments | 109 | 66 | - | 175 |
Carrying amount as at 31 December 2022 | 364 | 94 | 3 | 461 |
The carrying amounts of the lease liabilities and the changes during the period are stated below.
(in millions of euros) | 2022 | 2021 |
Lease liabilities as at 1 January | 930 | 2,066 |
Additions | 132 | 277 |
Business acquisitions | 364 | - |
Deconsolidation | - | -993 |
Interest allocated | 4 | 21 |
Payments | -220 | -499 |
Held for sale | -707 | 7 |
Currency differences | -39 | 51 |
Lease liabilities as at 31 December | 464 | 930 |
Presented under: | ||
Non-current | 377 | 634 |
Current | 87 | 296 |
The lease liabilities can be subclassified into the following countries:
(in millions of euros) | 31 December 2022 | 31 December 2021 |
The United Kingdom | - | 784 |
Germany | 331 | - |
The Netherlands | 133 | 146 |
Total | 464 | 930 |
The maturity analysis of lease liabilities is disclosed in note 25.
The following amounts are recognised in the income statement:
(in millions of euros) | 2022 | 2021 |
Cost of depreciation of right-of-use assets | 59 | 69 |
Reversal of impairments | -12 | - |
Interest expense on lease contracts | 4 | 7 |
Total recognised in the income statement | 51 | 76 |
The Group has no lease arrangements with material variable lease payments.
Accounting policy
The Group recognises a right-of-use asset and a lease liability at the commencement date of the lease arrangement. The right-of-use asset is initially measured at cost, comprising the initial amount of the lease liability, adjusted for any lease payments made at or before the commencement date of the lease arrangement, plus any initial direct costs incurred and an estimate of the costs of dismantling and removing the underlying asset or restoring the underlying asset or restoring the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated on a straight-line basis from the commencement date until the end of the lease term. The average depreciation periods are as follows:
-
Rolling stock 6 years
-
Real estate 11 years
-
Other 9 years
In addition, the right-of-use asset is periodically reduced by any impairment losses and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the Group's incremental borrowing rate. The incremental borrowing rate of interest consists of the risk-free rate plus a surcharge for country risk with account being taken of the object. The lease liability is measured at amortised cost using the effective interest method. It is remeasured if there is a change in the future lease payments as a result of a change in an index or rate, if there is change in the Group's estimate of the amount expected to be payable under a residual value guarantee or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option.