Group notes

Group as the Lessee
The Group recognizes a right-of-use asset and a corresponding lease liability on the balance sheet at the lease commencement date. The lease liability’s initial measurement is based on the present value of unpaid lease payments, employing the contract’s implicit interest rate or, when not readily available, the incremental borrowing rate. This rate takes into consideration country-specific risks. This includes fixed and variable payments, residual value guarantees, and lease payments linked to options reasonably expected to be exercised.

The lease liability is adjusted when there are changes in lease terms, purchase option assessments, variations in lease payments due to index fluctuations, or modifications to the lease contract, using recalculated discount rates.

Lease contracts involving low-value assets or with a term of less than 12 months are treated differently. Such payments are recognized as expenses over the lease term. Variable non-lease components, like service-related components, are expensed over the lease term.

The Group’s leasing contracts primarily encompass properties, machinery, technical assets, equipment, and installations, including facilities, offices, technical assets, and company cars. Lease agreements for office and factory facilities, as well as machinery, generally have durations ranging from 3 to 15 years, while motor vehicles and other equipment typically feature lease terms spanning 2 to 5 years. A limited number of these leasing contracts offer purchase and renewal options. With regards to machinery, there is often an option to acquire the underlying asset and extend the contract, and for premises, an extension option is available.

Consolidated Balance Sheet and Cash Flow
In the consolidated balance sheet, the Group categorizes lease liabilities into two sections: “non-current interest-bearing liabilities” and “current interest-bearing liabilities”. For more details on the right-of-use asset, see note 14.

In the consolidated statement of cash flows, the Group includes a line item labeled “Payment of lease liabilities”. This line item represents the amortization of liabilities arising from lease agreements and is included to account for the depreciation of the right to use the leased assets. Additionally, there is another line item labeled “Net financial items received/paid” which encompasses the portion of lease expenses related to ongoing interest costs on lease agreements. This includes any adjustments resulting from changes in the discount rates used for present value calculations.

Group as the Lessor
Lease contracts, provided by Epiroc Financial Solutions and certain other subsidiaries, are divided into two categories: operating and finance leases.

When the Group is acting as a lessor under an operating lease, the Group classifies the asset as rental equipment. Operating leases result in the recognition of assets valued at cost, accounting for depreciation over the contract term and considering future realizable value and residual value risks. Lease income is evenly distributed throughout the contract period.

In finance leases where the Group acts as the lessor, the transaction is recorded as a sale, creating a lease receivable that encompasses future minimum lease payments and any residual value guaranteed to the lessor. Lease payments represent both the repayment of the lease receivable and interest income.

In instances involving intermediate lessor roles, the Group accounts separately for head-lease and sub-lease arrangements, taking into consideration the right-of-use asset arising from the head-lease.