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Lease obligations | 12 Months Ended
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Dec. 31, 2019
Lease obligations | Change in accounting policy On January 1, 2019, the Group adopted ASU No. 2016-02, Leases (Topic 842) using the modified retrospective method. Under this guidance, the net present value of future lease payments are recorded as right-of-use assets and liabilities. In addition, the Group elected the ‘package of practical expedients’ permitted under the transition guidance within the new standard, which among other things, allowed the Group to carry forward the historical lease classification. In addition, the Group elected not to utilize the hindsight practical expedient to determine the lease term for existing leases. The Group elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Group did not recognize right-of-use assets or lease liabilities, including not recognizing right-of-use assets or lease liabilities for existing short-term leases of those assets in transition. The Group also elected to separate lease and non-lease components for our real estate leases. Adoption of the new standard resulted in the recording of additional operating right-of-use assets and operating lease liabilities of approximately US$133,000, as of January 1, 2019. The adoption of Topic 842 did not impact the Group’s retained earnings, consolidated net loss or cash flows. The following is a summary of the lease-related assets and liabilities recorded as of December 31, 2019:
| Classification on the consolidated balance sheet |  |  |
|  |  | US$’000 |
Asset |  |  |  |
Operating lease right-of-use assets | Operating lease right-of-use assets |  |  | 406 |
Liabilities |  |  |  |  |
Current |  |  |  |  |
Operating lease obligations | Current portion of operating lease obligations |  |  | 170 |
Non-current |  |  |  |  |
Operating lease obligations | Operating lease obligations, net of current maturities |  |  | 216 |
Total lease obligations |  |  |  | 386 |
The following is a summary of the lease terms and discount rates as of December 31, 2019:
Weighted-average remaining lease term – operating leases |  | 27 months |
Weighted-average discount rate - operating |  |  | 5 | %
The following is a summary of certain information related to the lease costs for operating leases for the year ended December 31, 2019:
|  | US$’000 |
Operating lease cost |  |  | 193 |
Short-term lease cost |  |  | 153 |
Total lease cost |  |  | 346 |
The following is a summary of other information and supplemental cash flow information related to operating leases for the year ended December 31, 2019:
Other information |  |  |
|  | US$’000 |
Cash paid for amounts included in the measurement of lease liabilities |  |  |
Operating cash flows from operating leases |  |  | 346 |
Right-of-use asset obtained in exchange for new operating lease obligations |  |  | 460 |
The future undiscounted minimum lease payments, as reconciled to the discounted minimum lease obligation indicated on the Group’s consolidated balance sheets, under current portion of operating lease obligations and operating lease obligations, net of current maturities, as of December 31, 2019 were as follows:
|  | Operating lease obligations |
|  | US$’000 |
2020 |  |  | 196 |
2021 |  |  | 138 |
2022 |  |  | 96 |
Total minimum lease payments |  |  | 430 |
Financing component |  |  | (44 | )
Net present value of minimum lease payments |  |  | 386 |
Less: current portion of operating lease obligations |  |  | (170 | )
Long-term operating lease obligations |  |  | 216 |
The financing component for operating lease obligations represents the effect of discounting the lease payments to their present value. The future minimum lease payments required under operating leases as of December 31, 2018 as reported in the Group's Annual Report on Form 20-F for the year ended December 31, 2018 under previous ASC 840 guidance were as follows:
|  | Operating lease obligations |
|  | US$’000 |
2019 |  |  | 87 |
Total minimum lease payments |  |  | 87 |
ZHEJIANG TIANLAN |
Lease obligations | Change in accounting policy On January 1, 2019, the Group adopted ASU No. 2016-02, Leases (Topic 842) using the modified retrospective method. Under this guidance, the net present value of future lease payments is recorded as right-of-use assets and liabilities. In addition, the Group elected the ‘package of practical expedients’ permitted under the transition guidance within the new standard, which among other things, allowed the Group to carry forward the historical lease classification. In addition, the Group elected not to utilize the hindsight practical expedient to determine the lease term for existing leases. The adoption of Topic 842 did not impact the Group’s retained earnings, consolidated net earnings or cash flows. The following is a summary of the lease-related assets and liabilities recorded at December 31, 2019:
| Classification on the consolidated balance sheet |  |  |
|  |  | RMB’000 |
Asset |  |  |  |
Finance lease right-of-use assets | Property and equipment, net of accumulated depreciation and impairment losses |  |  | 33,067 |
Liability |  |  |  |  |
Current |  |  |  |  |
Finance lease obligations | Current portion of finance lease obligations |  |  | 25,785 |
The following is a summary of the lease term and discount rate at December 31, 2019:
Weighted-average remaining lease term - finance leases |  | 1 year |
Weighted-average discount rate - finance leases |  |  | 5.9 | %
The following is a summary of certain information related to the lease costs for finance leases for the year ended December 31, 2019:
|  | RMB’000 |
Lease cost: |  |  |
Finance lease cost: |  |  |
Amortization of right-of-use assets |  |  | 10,001 |
Interest on lease liabilities included under cost of revenue and selling and administrative expenses |  |  | 2,214 |
Total lease cost |  |  | 12,215 |
The future undiscounted minimum lease payments, as reconciled to the discounted minimum lease obligation indicated on the Group’s consolidated balance sheets, under current portion of finance lease obligations, at December 31, 2019 were as follows:
|  | Finance lease obligation |
|  | RMB’000 |
2020 |  |  | 37,070 |
Total minimum lease payments |  |  | 37,070 |
Financing component |  |  | (11,285 | )
Net present value of minimum lease payments |  |  | 25,785 |
Less: current portion of finance lease obligations |  |  | (25,785 | )
Long-term finance lease obligations |  |  | - |
The financing component for finance lease obligations represents the interest component of finance leases that will be recognized as interest expense in future periods. Capital leases Prior to the adoption of ASU No. 2016-02, Leases (Topic 842), certain of the Group’s facilities and equipment leases met the characteristics of capital leases. The economic substance of these leases was a financing transaction for acquisition of the facilities and equipment and, accordingly, the leases were included in the consolidated balance sheets in property, plant and equipment, net of accumulated depreciation and impairment losses, with a corresponding amount recorded in current portion of lease obligations or lease obligations, net of current maturities, as appropriate. The capital lease assets were amortized on a straight-line basis over the life of the leased asset, and were included in depreciation expense in the consolidated statements of operations. The interest associated with capital leases was included in cost of revenue and selling and administrative expenses in the consolidated statements of operations. At December 31, 2018, the Group had RMB55,453,000 of capital lease obligations outstanding, RMB32,275,000 of which was classified as a current liability. At December 31, 2018, RMB43,068,000 of leased assets were capitalized in property and equipment, net of accumulated depreciation and impairment losses.

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- Definition The entire disclosure for lessee entity's leasing arrangements including, but not limited to, all of the following: (a.) The basis on which contingent rental payments are determined, (b.) The existence and terms of renewal or purchase options and escalation clauses, (c.) Restrictions imposed by lease agreements, such as those concerning dividends, additional debt, and further leasing. + References Reference 1: http://fasb.org/us-gaap/role/ref/otherTransitionRef -Publisher FASB -Name Accounting Standards Codification -Topic 840 -URI http://asc.fasb.org/topic&trid=2208923 + Details
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