Notes to the consolidated financial statements 30 June 2022 (continued) 14 Leases (continued) (c) Recognition and measurement (continued) Lease liabilities Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following payments: • fixed payments (including in-substance fixed payments), less any lease incentives receivable; • variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the commencement date; • amounts expected to be payable by the Group under residual value guarantees; • the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and • payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, an arm's length asset finance facility borrowing rate is used, being the rate that the individual lessee would have to pay to finance the asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. The weighted average borrowing rate used for the year was 3.8% (2021: 3.9%). Subsequent to initial recognition, lease liabilities are carried at amortised cost. Lease payments are allocated between principal and finance costs. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets Right-of-use assets are measured at cost and comprise the following: • the amount of the initial amount of lease liability; • any lease payments made at or before the commencement date, less any lease incentives received; • any initial direct costs; and • restoration costs. Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life. Short-term leases and leases of low value assets Payments associated with short-term leases of equipment and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Extension and termination options Extension and termination options are included in a number of property and equipment leases across the Group. These are used to maximise operational flexibility in terms of managing the assets used in the Group's operations. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor. Notes to the consolidated financial statements 30 June 2022 (continued) 14 Leases (continued) (d) Key estimates and judgements Lease term The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise an extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors considered may include the importance of the asset to the Group's operations; comparison of terms and conditions to prevailing market rates; incurrence of significant penalties; existence of significant leasehold improvements; and the costs and disruption to replace the asset. The Group reassesses whether it is reasonably certain to exercise an extension option, or not exercise a termination option, if there is a significant event or significant change in circumstances. Identification of non-lease components In addition to containing a lease, the Group’s mining services arrangements involve the provision of additional services, including personnel cost, maintenance, drilling related activities and other items. These are considered to be non-lease components and the Group has elected to separate these from the lease components. Judgement is required to identify each of the lease and non-lease components. The consideration in the contract is then allocated between the lease and non-lease components on a relative stand-alone price basis. This requires the Group to estimate stand-alone prices for each lease and non-lease component. Incremental borrowing rate Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to discount future lease payments to measure the present value of the lease liability at the lease commencement date. Such a rate is based on what the Group estimates it would have to pay to finance an asset of a similar value to the right-of-use asset, with similar terms, security and economic environment. 15 Mine properties Mine properties in development $M Mine properties in production $M Deferred stripping $M Total $M Year ended 30 June 2022 Cost 708.5 1,683.1 - 2,391.6 Accumulated amortisation - (807.9) - (807.9) Net book amount 708.5 875.2 - 1,583.7 Movements Carrying amount at beginning of the period - 804.1 - 804.1 Additions - 2.5 - 2.5 Acquisition of subsidiary 708.5 239.9 - 948.4 Amortisation expense - (163.7) - (163.7) Adjustment to rehabilitation provisions - (7.6) - (7.6) Closing net book amount 708.5 875.2 - 1,583.7 Notes to the consolidated financial statements 30 June 2022 Notes to the consolidated financial statements 30 June 2022 114 — IGO ANNUAL REPORT 2022 IGO ANNUAL REPORT 2022 — 115
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