IBERSOL | Annual Report 2021

CONSOLIDATED FINANCIAL STATEMENTS - conditions for contract renewal – for example with regard to the renewal period or rent conditions; - termination penalties; - location of assets and existence of viable alternatives to other commercial spaces. There are no residual value guarantees in the contracts. The main value judgments regarding the future and other sources of uncertainty essentially concern the future profitability perspectives of the stores which, as mentioned above, influence the lease term in cases where there are renewal and/or termination options. After the start date of the contracts, the Group reassesses the lease term if there is a significant event or change in circumstances that are under its control and that affect its ability to exercise or not to exercise the option to renew or terminate (for example, local changes in the consumer market and/or making significant improve- ments or customization of the leased asset). In determining the useful life of non-transferable assets, the Group considers, among other things, the lease term. Cases in which this useful life exceeds the lease term refer to situations in which the Group estimates, based on history, that a new con- tractual period will be agreed for that location. In general terms, there are no relevant inconsistencies between the lease terms of the contracts and the useful life of the respective underlying non-transferable assets. Lease liabilities are remeasured due to revaluations or changes to the lease. Interest on leases is shown in the consolidated statement of cash flows, in payments related to cash flows arising from financing activities. The amendment to IFRS 16 within Covid-19, allowed the use of a practical expedient for tenants, which exempts from the evaluation of the bonuses attributed by the les- sors qualify modifications to the leases. The Group opted for the application of this exemption, accounting for changes in rental payments, as variable rental rents in the periods in which the event or condition that led to the reduction in payment occurs. The practical expedient is only applicable when the following conditions are cumu- latively met: a) the change in lease payments results in a revised fee for the lease that is substan- tially equal to, or less than, the fee immediately prior to the change; b) any reduction in lease payments only affects payments due on or before 30th June 2022; and c) there are no substantive changes to other lease terms and conditions. 356