Half year report, IAS 34 para 16A (a), change of accounting policy to adopt IFRS 16, modified retrospective approach

ITV plc – Half year report – 30 June 2019

Industry: media

Changes in significant accounting policies
The Group has adopted IFRS 16 ‘Leases’ from 1 January 2019 which has changed lease accounting for lessees under operating leases. Such agreements now require recognition of an asset, representing the right to use the leased item, and a liability, representing future lease payments. Lease costs (such as property rent) are recognised in the form of depreciation and interest, rather than as an operating cost.

The Group has adopted the modified retrospective approach with the right of use asset equal to the lease liability at transition date, adjusted by any prepayments or lease incentives recognised immediately before the date of initial application. Under the modified retrospective transition approach, the comparative information is not restated.

The Group has elected to apply a single discount rate to assets with similar characteristics. The Group has also elected not to recognise right of use assets and lease liabilities for short-term leases or low-value assets and has also. The Group will continue to expense the lease payments associated with these leases on a straight-line basis over the lease term.

The Group leases many assets including office space, production properties, vehicles and office equipment.


Impact on Financial Statements
1) Impact on transition
On transition to IFRS 16, the Group recognised additional right of use assets, recognising the difference in retained earnings. This impact on transition is summarised below.


When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease payments using its incremental borrowing rate at 1 January 2019. The weighted-average rate applied is 3.39%.


2) Impacts for the period
As a result of applying IFRS 16, in relation to the leases that were previously classified as operating leases, the Group recognised £107 million of right of use assets and £113 million of lease liabilities as at 30 June 2019.

The right of use assets of £107 million has been included in property, plant and equipment on the balance sheet.

Also, in relation to those leases under IFRS 16, the Group has recognised depreciation and interest costs, instead of operating lease expense. During the six months ended 30 June 2019, the Group recognised £14 million of depreciation charges and £2 million of interest costs from those leases. No depreciation is recognised for the right of use asset that meets the definition of investment property. IFRS 16 has no impact at a profit before tax level but increases both our EBITA and interest by £2 million in the first half of the year.

For leases excluded from IFRS 16 under the exemption for leases with terms of less than 12 months, the Group recognised less than £1 million in rent expense in the period.