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13 Right-of-use assets

The Group generally purchases its production-related buildings and equipment (see note 12). However, it also enters into lease contracts. Right-of-use assets relate to lease contracts that the Group has entered into as a lessee. The contracts mainly cover leases of assets such as office buildings, production-related buildings and equipment, warehouses and cars.

Composition of right-of-use assets

(In € million)

 

Buildings

 

Plant and equipment

 

Cars

 

Total

Cost

 

113.1

 

49.4

 

7.5

 

170.0

Accumulated depreciation and impairment losses

 

(12.6)

 

(12.7)

 

(3.6)

 

(28.9)

Carrying amount as of 31 December 2020

 

100.5

 

36.7

 

3.9

 

141.1

Cost

 

156.7

 

65.8

 

9.6

 

232.1

Accumulated depreciation and impairment losses

 

(26.9)

 

(24.8)

 

(5.8)

 

(57.5)

Carrying amount as of 31 December 2021

 

129.8

 

41.0

 

3.8

 

174.6

Carrying amount as of 1 January 2020

 

24.1

 

21.6

 

3.3

 

49.0

Additions

 

86.1

 

23.8

 

3.0

 

112.9

Depreciation

 

(7.3)

 

(8.1)

 

(2.1)

 

(17.5)

Other adjustments

 

(0.2)

 

(0.2)

 

(0.2)

 

(0.6)

Effect of movements in exchange rates

 

(2.2)

 

(0.4)

 

(0.1)

 

(2.7)

Carrying amount as of 31 December 2020

 

100.5

 

36.7

 

3.9

 

141.1

Carrying amount as of 1 January 2021

 

100.5

 

36.7

 

3.9

 

141.1

Additions

 

5.8

 

13.7

 

2.2

 

21.7

Additions through business combination

 

26.5

 

0.2

 

 

26.7

Depreciation

 

(13.6)

 

(11.5)

 

(2.3)

 

(27.4)

Impairment losses

 

 

(0.1)

 

(0.1)

 

(0.2)

Effect of movements in exchange rates

 

10.6

 

2.0

 

0.1

 

12.7

Carrying amount as of 31 December 2021

 

129.8

 

41.0

 

3.8

 

174.6

The increase in right-of-use assets since 31 December 2020 is impacted by the full consolidation of the former joint ventures in the Middle East in 2021. The sleeves production plant of the former joint venture in Saudi Arabia is leased, with a remaining lease term of twelve years. See also notes 22 and 27.

The Group’s most significant leases are the 20-year lease of its second sleeves production plant in China that commenced in December 2020, and the 20-year lease of the SIG Tech Centre in China that commenced in 2018. These two leases, together with the lease of the sleeves production plant in Saudi Arabia, make up the larger part of the carrying amount of leased buildings. The larger part of the plant and equipment category relates to leases of production equipment for closures with a lease term of four to five years. The lease term of other assets is most commonly in the range of three to five years.

Depreciation of right-of-use assets

Depreciation of right-of-use assets is recognised in the following components in the statement of profit or loss and other comprehensive income.

(In € million)

 

Year ended
31 Dec. 2021

 

Year ended
31 Dec. 2020

Cost of sales

 

19.7

 

11.8

Selling, marketing and distribution expenses

 

4.4

 

3.0

General and administrative expenses

 

3.3

 

2.7

Total depreciation

 

27.4

 

17.5

Lease commitments

The Group has entered into lease contracts that have not yet commenced. The present value of estimated future lease payments under these lease contracts is approximately €77 million as of 31 December 2021 (€35 million as of 31 December 2020).

These contracts mainly relate to leases of production equipment for closures that are expected to commence within the next twelve to fifteen months and to the 15-year lease of the Group’s first sleeves production plant in Mexico that is expected to commence in the second half of 2022, but with production expected to start in the first quarter of 2023 (see also note 12). As of 31 December 2020, the committed lease payments mainly related to leases of production equipment for closures that were expected to commence within the next twelve to fifteen months.

Accounting policy

At the commencement date of lease, the Group recognises a lease liability and a related right-of-use asset. The accounting for lease liabilities is described in note 22.

The right-of-use asset represents the Group’s right to use the leased asset. A right-of-use asset is initially measured at cost, which in many cases will equal the amount recognised as a lease liability. However, adjustments are required for any lease payments made at or before the commencement date of the lease and any initial direct costs incurred. The cost also includes the estimated cost to dismantle and remove the leased asset, to restore it to the condition required under the lease contract or to restore the site on which it is located, to the extent such an amount is recognised as a provision.

Subsequent to initial recognition, a right-of-use asset is measured at cost less accumulated depreciation and impairment losses. A right-of-use asset is subsequently also adjusted for certain remeasurements of the related lease liability.

Right-of-use assets are depreciated on a straight-line basis from the commencement date of the lease over the shorter of the lease term and their useful lives, unless it is reasonably certain that the Group will obtain ownership by the end of the lease term.

As for PP&E, right-of-use assets are reviewed regularly and at least annually to identify whether there is an indication of impairment. If an impairment indicator exists, the asset’s recoverable amount is estimated. See note 5.5.3 for further details about impairment testing of non-financial assets.