Page 37 - UKZN Foundation AR 2023

UNIVERSITY OF KWAZULU-NATAL FOUNDATION TRUST Trust Deed number: IT 589/2003
NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 December 2023
1.12. Accounting for leases -iFRS 16
All leases are accounted for by recognising a right-of-use asset and a lease liability except for: - Leases of low value assets;
- Leases with a duration of 12 months or less; and
- Leases with only variable lease payments.
The lease liability is initially measured at the present value of the lease payments payable over the lease term, discounted at the rate implicit in the lease or, where this cannot be determined, at the University’s incremental borrowing rate.
Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for lease payments made at or before commencement of the lease: initial direct costs incurred, and restoration costs.
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. The subsequent lease liability is remeasured to reflect changes in:
- the lease term using the revised discount rate;
- assessment of any purchase options; and
- amounts payable or expected to be payable under residual value guarantees.
All subsequent remeasurements are treated as adjustments to the right-of-use assets. Where the right-of-use asset value is nil, any adjustment is recognized in profit and loss.
The University measures the right-of-use asset at the cost less accumulated depreciation and impairment. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, this is considered to be shorter than the lease term. The University assesses whether the right-of-use assets are impaired applying IAS 36 impairment of Assets on an annual basis.
Lease modifications are accounted for as separate leases if the modification increases the scope of the lease by adding the right to use one or more underlying assets and the consideration for the lease increases by an amount commensurate with the stand- alone price for the increase in scope. Lease modifications that do not give rise to a separate lease are accounted for by adjusting the right-of-use asset.
Expenses relating to short term leases of 12 months or less, all leases of low value assets and those leases with payments which are variable in nature are written off to profit and loss.
UKZN FOUNDATiON ANNUAL REPORT 2023 35