Group Overview Operation and Financial Review Financials Other Information Sustainability and Governance Indofood Agri Resources Ltd. 86 Notes to the financial statements For the financial year ended 31 December 2025 2. Summary of material accounting policies information (cont’d) 2.23 Leases (cont’d) (a) Right-of-use assets (cont’d) Land use rights The Group’s titles of ownership on its land rights, including the plantation land, are in the form of: Lease term (years) • Right to Build (“Hak Guna Bangunan” or “HGB”) 19 to 40 • Right to Cultivate (“Hak Guna Usaha” or “HGU”) 19 to 39 • Right to Use (“Hak Pakai” or “HP”) 20 to 25 • Right to Manage (“Hak Pengelolaan Lahan” or “HPL”) 4 to 30 Included as part of the land use rights are the costs associated with the legal transfer or renewal of land right title, such as legal fees, land survey and re-measurement fees, taxes and other related expenses. Land use rights are initially measured at cost. Following initial recognition, land use rights are measured at cost less accumulated amortisation. The land use rights are amortised on a straightline basis over the lease term. If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment as disclosed in Note 2.11. (b) Lease liabilities At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset. (c) Short-term leases and leases of low-value assets The Group also has certain leases of office equipment with lease terms of less than 12 months (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option) or with low value. The Group applies the ‘short-term lease’ and ‘lease of low-value assets’ recognition exemptions for these leases and recognise lease expenses on a straight-line basis. These expenses are presented within general and administrative expenses in the profit or loss.
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