Note 18 - Leases

When the Group acts as lessee, the present value of lease payment commitments that are fixed or fixed in substance and due under concession agreements in transport hubs and hospitals, building leases or leases of other equipment, are recognised within lease liabilities against a corresponding right-of-use asset.
The variable portion of lease payments under concession agreements, based on passenger flows or revenue earned by retail outlets, continues to be shown in external charges or in other operating expenses. In application of the full retrospective method, lease liabilities are discounted at the rate set at the start of each agreement. The discount is updated to take account of any modifications, notably as regards the leased surface area or lease term. The discount rates applied are within a range of between 0.05% and 9.16%.

Changes in right-of-use assets and lease liabilities were as follows in 2019 and 2018:

Droits d’utilisation

  Gross amount Depreciation
and impairment losses		 Carrying amount
  Concession
agreements		 Buildings
and other		 Total Concession
agreements		 Buildings
and other		 Total Concession
agreements		 Buildings
and other		 Total
At 1 January 2019​ 3 229 912 4 141 (1 220) (369) (1 589) 2 009 543 2 552
New leases 441 29 470       441 29 470
Depreciation       (473) (73) (546) (473) (73) (546)
Impairment losses       - - - - - -
Translation adjustments 40 11 51 (17) (4) (21) 23 7 30
Lease modifications 58 14 72       58 14 72
Lease remeasurements 13 (7) 6       13 (7) 6
Changes in scope of consolidation 336 1 337 - - - 336 1 337
Terminated leases (250) (73) (323) 250 73 323 - - -
Discontinued operations and other 4 (109) (105) (7) 50 43 (3) (59) (62)
At 31 December 2019 3 871 778 4 649 (1 467) (323) (1 790) 2 404 455 2 859

 

  Gross amount Depreciation
and impairment losses		 Carrying amount
  Concession
agreements		 Buildings
and other		 Total Concession
agreements		 Buildings
and other		 Total Concession
agreements		 Buildings
and other		 Total
At 1 January 2018 3 019 766 3 785 (1 086) (321) (1 407) 1 933 445 2 378
New leases 579 176 755       579 176 755
Depreciation       (399) (65) (464) (399) (65) (464)
Impairment losses       - - - - - -
Translation adjustments 3 5 8 1 (1) - 4 4 8
Lease modifications (120) (3) (123)       (120) (3) (123)
Lease remeasurements 10 1 11       10 1 11
Changes in scope of consolidation 2 (18) (16) - 11 11 2 (7) (5)
Terminated leases (264) (10) (274) 264 10 274 - - -
Net cash from (used in) discontinued operations - (5) (5) - (3) (3) - (8) (8)
At 31 December 2018 3 229 912 4 649 (1 220) (369) (1 790) 2 009 543 2 552

Lease liabilities

  Non-current lease liabilities Current lease liabilities Total lease liabilities
  Concession
agreements		 Buildings
and other		 Total Concession
agreements		 Buildings
and other		 Total Concession
agreements		 Buildings
and other		 Total
At 1 January 2019​ 1 730 553 2 283 395 63 458 2 124 617 2 741
New leases 438 28 466 - - - 438 28 466
Interest expense - - - 66 19 85 66 19 85
Lease payments - - - (518) (77) (595) (518) (77) (595)
Reclassifications(*) (523) (64) (587) 523 64 587 - - -
Translation adjustments 21 8 29 5 - 5 26 8 34
Lease modifications 58 14 72 - - - 58 14 72
Lease remeasurements 13 (7) 6 - - - 13 (7) 6
Changes in scope of consolidation 295 1 296 38 - 38 333 1 334
Discontinued operations and other - (38) (38) 3 (11) (8) 3 (49) (46)
At 31 December 2019​ 2 032 495 2 527 512 58 570 2 543 554 3 097

 

  Non-current lease liabilities Current lease liabilities Total lease liabilities
  Concession
agreements		 Buildings
and other		 Total Concession
agreements		 Buildings
and other		 Total Concession
agreements		 Buildings
and other		 Total
At 1 January 2018 1 677 438 2 115 356 75 431 2 032 514 2 546
New leases 581 175 756 - - - 581 175 756
Interest expense - - - 59 17 76 59 17 76
Lease payments - - - (444) (75) (519) (444) (75) (519)
Reclassifications(*) (422) (55) (477) 422 55 477 - - -
Translation adjustments 4 5 9 2 (1) 1 6 4 10
Lease modifications (122) (4) (126) - - - (122) (4) (126)
Lease remeasurements 10 1 11 - - - 10 1 11
Changes in scope of consolidation 2 1 3 - (9) (9) 2 (8) (6)
Net cash from (used in) discontinued operations - (8) (8) - 1 1 - (7) (7)
At 31 December 2018 1 730 553 2 283 395 63 458 2 124 617 2 741

(*) Reclassifications relate to the current portion of lease liabilities, reclassified within current lease liabilities.

Interest expense on lease liabilities represented €85 million in 2019 versus €76 million in 2018. The €9 million increase is mainly due to the inclusion of new leases, notably leases held by the Hojeij Branded Foods group, which was acquired in November 2018.  Lease payments increased by €76 million to €595 million in 2019 compared to €519 million in 2018, also due to the inclusion of new leases held by HBF and IDF.
Lease modifications in 2019 relate primarily to changes in rent and guaranteed minimum payments and to increases in the premises leased under concession agreements. Changes in right-of-use assets and the corresponding lease liabilities are attributable to:

  • an increase in lease terms and in premises leased, representing a positive €69 million;
  • a decrease in lease terms and in premises leased, representing a negative €40 million;
  • rent modifications representing a positive €49 million;
  • the impact of discounting future lease payments at a revised discount rate, representing a negative €6 million.

Lease remeasurements correspond to changes in management estimates regarding the dates the leases are reasonably expected to terminate, and to the impact of indexing lease payments. Lease remeasurements led to a €6 million increase in the value of right-of-use assets and lease liabilities at 31 December 2019.
Certain leases have not been restated and do not give rise to a right-of-use asset or a lease liability. These are leases with variable lease payments with a term of less than 12 months or with a low-value underlying asset. The corresponding rental expenses, representing €207 million in 2019 (€126 million in 2018), continue to be shown in external charges or in other operating expenses, including €192 million in respect of variable lease payments under concession agreements.
Rental expenses as restated for IFRS 16 represent €620 million for 2019, including €532 million under concession agreements and €88 million under buildings and other leases. Rental expenses as restated represented €523 million in 2018, including €443 million under concession agreements and €78 million under buildings and other leases.

The table below shows the maturity of undiscounted lease liabilities:

Lease liabilities 31 Dec. 2020 31 Dec. 2021 31 Dec. 2022 31 Dec. 2023 31 Dec. 2024 Beyond
5 years		 Total
Concession agreements 569 511 456 362 261 588 2 748
Buildings and other 94 94 86 76 68 276 695
At 31 December 2019 663 605 542 438 329 864 3 443

 

Lease liabilities 31 Dec. 2019 31 Dec. 2020 31 Dec. 2021 31 Dec. 2022 31 Dec. 2023 Beyond
5 years		 Total
Concession agreements 456 410 381 332 253 510 2 342
Buildings and other 81 79 89 84 75 305 713
At 31 December 2018 537 489 470 416 328 815 3 055

At 31 December 2019, the residual weighted average term of concession agreements and building leases was six years and nine years, respectively.
Concession agreements and building leases signed at 31 December 2019 but not yet effective, represented total undiscounted lease payment commitments of €40 million. The Group sub-lets retail premises and office space under operating leases in which it acts as lessor. The associated income from sub-letting such premises continues to be included within other operating income.
In certain cases, sub-letting arrangements cover substantially all of the risks and rewards of the principal lease, and are recognised as finance leases. Right-of-use assets relating to the principal lease are derecognised and a financial receivable booked.