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RIGHT-OF-USE ASSETS
 12 Months Ended
Dec. 31, 2022
Right-of-use Assets  
RIGHT-OF-USE ASSETS

NOTE－10 RIGHT-OF-USE ASSETS

 

The Company adopted ASU No. 2016-02, Leases, on January 1, 2019, the beginning of the fiscal 2019, using the modified retrospective approach. The Company determines whether an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is conveyed if we obtain the rights to direct the use of and to obtain substantially all of the economic benefit from the use of the underlying asset. Some of our leases include both lease and non-lease components which are accounted for as a single lease component as the Company has elected the practical expedient. Some of the operating lease agreements include variable lease costs, primarily taxes, insurance, common area maintenance or increases in rental costs related to inflation. Substantially all of our equipment leases and some of our real estate leases have terms of less than one year and, as such, are accounted for as short-term leases as we have elected the practical expedient.

 

Operating leases are included in the right-of-use lease assets, other current liabilities and long-term lease liabilities on the Consolidated Balance Sheet. Right-of-use assets and lease liabilities are recognized at each lease’s commencement date based on the present values of its lease payments over its respective lease term. When a borrowing rate is not explicitly available for a lease, the incremental borrowing rate is used based on information available at the lease’s commencement date to determine the present value of its lease payments. Operating lease payments are recognized on a straight-line basis over the lease term.

 

The Company adopts 3.35% as weighted average incremental borrowing rate to determine the present value of the lease payments. The weighted average remaining life of the lease was 3 years.

 

The table below presents the lease-related assets and liabilities recorded on the balance sheet.

 

   2022   2021  
   As of December 31, 
   2022   2021  
   $’000   $’000  
          
Assets           
Finance lease, right-of-use asset, net (classified under property and equipment, net)   5    21  
Operating lease, right-of-use asset, net   1,489    1,769  
            
Total right-of-use asset   1,494    1,790  
            
Liabilities           
Current:           
Finance lease liabilities   3,024    1,472  
Operating lease liabilities   460    475  
Lease liabilities current   3,484    1,947  
            
Non-current:           
Finance lease liabilities   991    2,306  
Operating lease liabilities   1,123    1,364  
Lease liabilities noncurrent   2,114    3,670  
            
Total lease liabilities   5,598    5,617  

 

 

As of December 31, 2022, right-of-use assets were $1.5 million and lease liabilities were $1.6 million.

 

As of December 31, 2021, right-of-use assets were $1.8 million and lease liabilities were $1.8 million.

 

The Company excludes short-term leases (those with lease terms of less than one year at inception) from the measurement of lease liabilities or right-of-use assets. The following tables summarize the lease expense for the financial years.

 

   2022   2021   2020 
   Financial Years ended December 31, 
   2022   2021   2020 
   $’000   $’000   $’000 
             
Finance lease cost:               
Interest on lease liabilities (per ASC 842)   66    77    88 
                
Operating lease cost:               
Operating lease expense (per ASC 842)   828    775    691 
Short-term lease expense (other than ASC 842)   20    4    6 
                
Total lease expense   848    779    697 

 

Components of Lease Expense

 

We recognize lease expense on a straight-line basis over the term of the operating leases, as reported within “general and administrative” expense on the accompanying consolidated statement of operations.

 

 

Future Contractual Lease Payments as of December 31, 2022

 

The below table summarizes our (i) minimum lease payments over the next five years, (ii) lease arrangement implied interest, and (iii) present value of future lease payments for the next three years ending December 31:

 

Financial Years ending December 31, 

Operating and

finance lease

amount

 
    $’000 
      
2023   3,658 
2024   2,171 
Less: interest   (231)
      
Present value of lease liabilities   5,598 
      
Representing:     
Current liabilities   3,484 
Non-current liabilities   2,114 
      
Total lease payments   5,598