Notes to the consolidated financial statements (continued) 132 John Lewis Partnership plc Annual Report and Accounts 2016


5 Financing (continued)


5.6 Finance lease liabilities We enter into leases for property, plant and equipment. Finance leases arise when the terms of the lease agreement substantially transfer all the risks and rewards of ownership of an asset to the Partnership. This note details the schedule of payments due over the life of the finance leases, together with the present value of the finance leases recorded in the consolidated balance sheet.


Accounting policy


Leased assets: Assets used by the Partnership which have been funded through finance leases on terms that transfer to the Partnership substantially all the risks and rewards of ownership are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. The interest element of finance lease rentals is charged to the income statement. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.


Leases where the Partnership does not retain substantially all the risks and rewards of ownership of the asset are classified as operating leases. Operating lease rental payments, other than contingent rentals, are recognised as an expense in the income statement on a straight-line basis over the lease term. Contingent rentals are recognised as an expense in the income statement when incurred.


Lease premia and inducements are recognised in current and non-current assets or liabilities as appropriate, and amortised or released on a straight-line basis over the lease term.


Sub-lease income is recognised as other operating income on a straight-line basis over the sub-lease term, less allowances for situations where recovery is doubtful.


Finance lease liabilities


The minimum lease payments under finance leases fall due as follows: Not later than one year


Later than one year but not more than five More than five years


Future finance charge on finance leases Present value of finance lease liabilities


Of which: Not later than one year


Later than one year but not more than five More than five years


2016 £m


(3.6) (7.1)


(37.5) (48.2) 20.9


(27.3)


(2.6) (3.8)


(20.9)


The Partnership’s finance lease liabilities relate to property, plant and equipment that have been classified as finance leases in accordance with IAS 17 ‘Leases’.


2015 £m


(4.3)


(10.5) (38.8) (53.6) 22.2


(31.4)


(3.1) (6.9)


(21.4)


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