REA Group Ltd Annual Report 2021

Notes to the Consolidated Financial Statements for the year ended 30 June 2021 REA Group Ltd | Annual Report 2021 10. Leases (continued) Key estimate and judgement The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. If the Group cannot readily determine the interest rate implicit in the lease, it uses the lessee’s incremental borrowing rate (“IBR”) to measure lease liabilities. The IBR is the rate of interest that the lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group would have to pay, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when they need to be adjusted to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary’s functional currency). The Group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating). (a) Leases as a lessee The Group typically leases office space over periods of two to seven years, with an option to renew the lease after that date. Lease payments are renegotiated on the exercise of renewal options to reflect market rentals. Some leases provide for additional rent payments that are based on changes in local price indices. For certain leases, the Group is restricted from entering into any sub-lease arrangements. The Group leases IT equipment with contract terms of one to five years. These leases are short-term and/or leases of low-value items. The Group has elected not to recognise right-of-use assets and lease liabilities for these leases. (i) Right-of-use assets Right-of-use assets are presented as property, plant and equipment (see Note 23). The Group leases various assets including buildings and IT equipment. Information about leases for which the Group is a lessee is presented below. Property $’000 Equipment $’000 Total $’000 Balance at 1 July 2020 82,372 83 82,455 Additions 250 – 250 Other business combinations 1 2,374 – 2,374 Remeasurement (39) 483 444 Depreciation (9,640) (566) (10,206) Disposals (net of accumulated depreciation) (275) – (275) Transferred to assets held for sale (1,022) – (1,022) Exchange differences (net) (255) – (255) Balance at 30 June 2021 73,765 – 73,765 Balance at 1 July 2019 71,045 358 71,403 Additions 22,721 – 22,721 Remeasurement (136) – (136) Depreciation (9,163) (275) (9,438) Disposals (net of accumulated depreciation) (2,191) – (2,191) Exchange differences (net) 96 – 96 Balance at 30 June 2020 82,372 83 82,455 1 Acquisition of Mortgage Choice. 92 Financial Statements