31. Leases

Accounting policy

The Group recognises a right-of-use asset and a lease liability at the commencement date of the lease agreement. The right-of-use asset is initially measured at cost, which consists of the initial amount of the lease liability, adjusted for any lease payments made on or before the commencement date of the lease agreement, plus any initial direct costs incurred and an estimate of the costs of dismantling and removing the underlying asset or restoring the underlying asset or the location where the asset is located, less any lease bonuses received.

The right-of-use asset is then depreciated on a straight-line basis from the commencement date to the end of the lease term. The average depreciation periods are:

• Rolling stock 6 years

• Property 11 years

• Other 9 years

In addition, the right-of-use asset is periodically reduced by any impairment losses and adjusted for certain revaluations of the lease liability.

The lease liability is initially measured at the present value of the lease payments not paid at the commencement date, discounted using the Group's incremental borrowing rate. The incremental borrowing rate consists of the risk-free interest rate plus a country risk premium and taking into account the asset. The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments due to a change in an index or rate, if there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension, or termination option.