IBERSOL | Annual Report 2021

CONSOLIDATED FINANCIAL STATEMENTS they are inserted and which, in general, can be summarized: - leases in Shopping Centers: these are, as a rule, for a period of 6 years, with a fixed monthly income or an income based on monthly sales, if this is greater than the fixed income; - leases in street locations: they are usually for longer periods of 10 to 20 years with a fixed monthly income, and there may be an option to terminate by the lessee for a shorter period. There are other contracts that are concluded for shorter periods and the lessee has the right to successive renewals up to a maximum period that is usually 20 years; - leases in concession spaces: for the contractual period with a variable rent based on annual sales subject to a guaranteed minimum annual value. Occasionally, there are variable rent lease contracts or, in the case of Airports in Spain, pursuant to Law 13/2021 in which the minimum annual rents are based on the traffic of the Airports until the traffic of the year 2019 is reached. With the adoption of IFRS 16, the distinction between operating leases (off balance sheet) and finance leases (included in the balance sheet) has been eliminated at the lessee level, having been replaced by a model in which it is accounted for an asset identified with a right to use and a corresponding liability for all lease agreements. On the effective date of the lease, the Group recognizes the lease liability at the present value of lease payments that are not paid on that date and the respective right to use. Payments relating to variable components of the contract are not considered as lease payments, but are recognized as an expense in the year in which they occur. These rents are determined by a percentage of the sales of each space and are in- cremental compared to the minimum contracted rents. For the year ended 31st December, 2021, exposure to variable lease payments is reduced. For a variation of more than 5% in sales in all the Group’s restaurants, an increase in total rentals of 0.5% is estimated. The Group applies the exemption from recognition provided for in paragraph 6 of IFRS 16 to short-term lease contracts and leases where the underlying asset has a reduced value. Right of use The right of use is initially measured at cost and subsequently at the net cost of de- preciation and impairment, adjusted by remeasurement of the lease liability. The right of use is constituted by the initial value of the liabilities with leases and by initial direct costs and payments made to the lessor before the date of entry into force of the lease, less the rental incentives received. The right of use is depreciated on a straight-line basis over the term of the contract, 354