Annual Report 2021

CHINA MERCHANTS PORT HOLDINGS COMPANY LIMITED 118 Notes to the Consolidated Financial Statements For the year ended 31 December 2021 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.23 Leases (continued) (ii) The Group as a lessee Allocation of consideration to components of a contract For a contract that contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand- alone price of the lease component and the aggregate stand-alone price of the non-lease components. As a practical expedient, leases with similar characteristics are accounted on a portfolio basis when the Group reasonably expects that the effects on the consolidated financial statements would not differ materially from individual leases within the portfolio. Short-term leases The Group applies the short-term lease recognition exemption to leases of plant, machinery, furniture and equipment, that have a lease term of 12 months or less from the commencement date and do not contain a purchase option. Lease payments on short-term leases are recognised as expense on a straight-line basis over the lease term. Right-of-use assets The cost of right-of-use asset includes: ‧ the amount of the initial measurement of the lease liability; ‧ any lease payments made at or before the commencement date, less any lease incentives received; ‧ any initial direct costs incurred by the Group; and ‧ an estimate of costs to be incurred by the Group in dismantling and removing the underlying assets, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease. Except for those that are classified as investment properties and measured under fair value model, right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. Right-of-use assets in which the Group is reasonably certain to obtain ownership of the underlying leased assets at the end of the lease term is depreciated from commencement date to the end of the useful life. Otherwise, right-of-use assets are depreciated on a straight-line basis over the shorter of their estimated useful lives and the lease terms.