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v3.19.3.a.u2

Leases | 12 Months Ended
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Dec. 31, 2019
Presentation of leases for lessee [abstract] |
Leases | 15. Leases Right-of-use assets
|  | Property $m |  |  | Other $m |  |  | Total $m |
Cost |  |  |  |  |  |  |  |  |  |  |  |
At 1 January 2018 |  |  | 740 |  |  |  | 10 |  |  |  | 750 |
Additions and other re-measurements |  |  | 19 |  |  |  | 1 |  |  |  | 20 |
Acquisition of businesses (note 11) |  |  | 51 |  |  |  | — |  |  |  | 51 |
Terminations |  |  | (8 | ) |  |  | (6 | ) |  |  | (14 | )
Exchange and other adjustments |  |  | (10 | ) |  |  | — |  |  |  | (10 | )
At 31 December 2018 |  |  | 792 |  |  |  | 5 |  |  |  | 797 |
Additions and other re-measurements |  |  | 39 |  |  |  | 1 |  |  |  | 40 |
Acquisition of businesses (note 11) |  |  | 25 |  |  |  | — |  |  |  | 25 |
Transfers to assets classified as held for sale (note 12) |  |  | (23 | ) |  |  | — |  |  |  | (23 | )
Terminations |  |  | (15 | ) |  |  | (1 | ) |  |  | (16 | )
Exchange and other adjustments |  |  | 4 |  |  |  | — |  |  |  | 4 |
At 31 December 2019 |  |  | 822 |  |  |  | 5 |  |  |  | 827 |
Depreciation and impairment |  |  |  |  |  |  |  |  |  |  |  |
At 1 January 2018 |  |  | (257 | ) |  |  | (7 | ) |  |  | (264 | )
Provided |  |  | (34 | ) |  |  | (1 | ) |  |  | (35 | )
System Fund expense |  |  | (4 | ) |  |  | — |  |  |  | (4 | )
Terminations |  |  | 8 |  |  |  | 6 |  |  |  | 14 |
Exchange and other adjustments |  |  | 5 |  |  |  | — |  |  |  | 5 |
At 31 December 2018 |  |  | (282 | ) |  |  | (2 | ) |  |  | (284 | )
Provided |  |  | (37 | ) |  |  | (1 | ) |  |  | (38 | )
System Fund expense |  |  | (5 | ) |  |  | — |  |  |  | (5 | )
Impairment charge |  |  | (32 | ) |  |  | — |  |  |  | (32 | )
Transfers to assets classified as held for sale (note 12) |  |  | 8 |  |  |  | — |  |  |  | 8 |
Terminations |  |  | 14 |  |  |  | 1 |  |  |  | 15 |
Exchange and other adjustments |  |  | (1 | ) |  |  | — |  |  |  | (1 | )
At 31 December 2019 |  |  | (335 | ) |  |  | (2 | ) |  |  | (337 | )
Net book value |  |  |  |  |  |  |  |  |  |  |  |
At 31 December 2019 |  |  | 487 |  |  |  | 3 |  |  |  | 490 |
At 31 December 2018 |  |  | 510 |  |  |  | 3 |  |  |  | 513 |
At 1 January 2018 |  |  | 483 |  |  |  | 3 |  |  |  | 486 |
The Group’s leased assets mainly comprise hotels and offices. Leases contain a wide range of different terms and conditions. The term of property leases ranges from 1-99 years. The weighted average lease term remaining on the Group’s t op ten leases (which comprise 91% of the right-of-use asset net book value ) is 42 years. Many of the Group’s property leases contain extension or early termination options, which are used for operational flexibility. Two of the Group’s top ten leases contain material extension options which are not included in the calculation of the lease asset and liability as neither of these extensions would take effect before 2031. The value of the undiscounted rental payments relating to these two leases and not included in the value of the lease asset and liability is $525m. Lease liabilities Total lease liabilities are analysed as follows:
Denominated in the following currencies: |  | 2019 $m |  |  | 2018 $m |
US d ollars |  |  | 514 |  |  |  | 528 |
Sterling |  |  | 52 |  |  |  | 61 |
Euros |  |  | 43 |  |  |  | 29 |
Other |  |  | 51 |  |  |  | 52 |
|  |  | 660 |  |  |  | 670 |
Analysed as: |  |  |  |  |  |  |  |
Current |  |  | 65 |  |  |  | 55 |
Non-current |  |  | 595 |  |  |  | 615 |
|  |  | 660 |  |  |  | 670 |
Amounts recognised in profit or loss The following amounts were recognised as expense/(income) in the year:
|  | 2019 $m |  |  | 2018 $m |  | 2017 $m |
Depreciation of right-of-use assets |  |  | 38 |  |  |  | 35 |  |  | 34 |
System Fund depreciation of right-of-use assets |  |  | 5 |  |  |  | 4 |  |  | 5 |
Expense relating to variable lease payments |  |  | 58 |  |  |  | 48 |  |  | 30 |
Expense relating to short-term leases and low-value assets |  |  | 3 |  |  |  | 3 |  |  | 2 |
Income from sub-leasing right-of-use assets |  |  | (2 | ) |  |  | (2 | ) |  | (2 | )
Impairment charge |  |  | 32 |  |  |  | — |  |  | — |
Recognised in operating profit |  |  | 134 |  |  |  | 88 |  |  | 69 |
Interest on lease liabilities |  |  | 41 |  |  |  | 39 |  |  | 39 |
Total recognised in the Group income statement |  |  | 175 |  |  |  | 127 |  |  | 108 |
Amounts recognised in the Group statement of cash flows As restated for IFRS 16, total cash paid during the year relating to leases of $159m (2018: $132m, 2017: $87m) comprises $100m (2018: $97m, 2017: $62m) paid in respect of operating activities and $59m (2018: $35m , 2017: $25m ) paid in respect of financing activities. Variable lease payments Variable lease payments are payable under certain of the Group’s hotel leases and arise where the Group is committed to making additional lease payments that are contingent on the performance of the hotels . The UK portfolio and two German hotel leases include variable lease payments where rentals are linked to the performance of the hotels by way of reductions in rentals in the event that lower than target cash flows are generated by the hotels. In the event that rent reductions are not applicable, the Group’s exposure to this type of rental payment in excess of amounts reflected in the measurement of lease liabilities is as follows:
• |  | UK portfolio: £46m per annum over the remaining lease term of 24 years,
• |  | German hotels: €16m per annum over the next six years and €10m per annum for the next 24 years thereafter .
Additional rentals, which are uncapped, are also payable in respect of these hotels and are calculated as a percentage of the profit earned by the hotels. The UK and German leases also contain guarantees that the Group will fund any shortfalls in lease payments up to annual and cumulative caps. There are a limited number of options for the Group to top up the guaranteed amount in the event the guarantee is utilised beyond a certain level. Although there are scenarios in which rent reductions would apply such that no rent would be payable, management consider the likelihood of these occurring to be remote. As such, the cumulative guaranteed amount is judged to be an ‘in-substance fixed’ lease payment and therefore recognised as a right-of-use asset and corresponding lease liability. The right-of-use asset is depreciated over the lease term and the lease liability is reduced by the amount of rental payments under the guarantee. During the year, total depreciation of $3m (2018: $2m , 2017: $1m) was charged to the income statement and total lease payments of $26m (2018: $3m) were charged against the lease liability. The right-of-use asset relating to the UK portfolio was impaired by $32m during the year (see note 13) and rental payments of $17m (2018: $3m) were charged against the lease liability in respect of this portfolio. Exposure to future cash outflows At 31 December 2019, the Group was committed to future cash outflows of $ 3m (2018: $1m) relating to leases that have not yet commenced. These will be recorded as a lease liability when the lease d assets are available for use by the Group. The maturity analysis of lease liabilities is disclosed in n ote 24. The undiscounted future cash flows receivable from sub-leased properties amount to $3m ( 2018: $ 3m, 2017: $4m ) .

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