ÇELEBİ AR19-270720 (1)

43 Çelebi Ground Handling Inc. 2019 Annual Report Key Audit Matter How the matter was addressed in the audit Transition to TFRS 16 Leases and Presentation of Right of Use Assets and Lease Liabilities in Consolidated Financial Statements As stated in Note 2, TFRS 16 Leases (“TFRS 16”) is effective for periods beginning on or after January 1, 2019. TFRS 16 provides a tenant accounting model based on specific measurement methods. Accordingly, it requires the accounting of assets and liabilities. The lessee recognises a right of use assets that represents the right to use of the leased assets and a lease obligation that represents the obligation to pay for the leased asstes. The Group has lease agreements for land and buildings, machinery, plant and equipments and vehicles. As of December 31, 2019, TL 428.056.013 of right of use assets was recognized in the consolidated statement of financial position. The share of the right of use assets in non current assets is 19%. As of December 31, 2019, the Group has recognized TL 458.746.839 of lease liabilities for the lease agreements. The amounts recognized as a result of the application of TFRS 16 are significant for the consolidated financial statements and the determination of the accounting policy depends on the Group Management. In addition, the calculation of the right-to-use assets and lease obligations includes significant estimates and assumptions of the management. The substantial part of these estimates are interest rates used to discount cash flows and assessment of options to extend or terminate lease contracts. Nevertheless, the notes to the consolidated financial statements of the Group as of December 31, 2019 are significantly affected by the application of TFRS 16. Therefore, the impacts of the first-time adoption of TFRS 16 on the consolidated financial statements and the notes to the consolidated financial statements are determined as a key audit matter for our audit. Please refer to Notes 2, 7 and 12 to the consolidated financial statements for the amounts and disclosures, including the related accounting policies. The audit procedures applied including but not limited to the following are: Understanding and evaluating the significant processes affecting financial reporting related to the adoption of TFRS 16, Inquiring with the Group management and understanding their assessment regarding the transition process to TFRS 16 and assessing the compliance of their assessment with the transition rules of the standard, Evaluating the completeness of the contract lists obtained from the Group management, assessment of selected contracts whether they are a service or lease contract and evaluating whether the contracts defined by the Group as leases are in scope of TFRS 16, Evaluating the compliance of the simplified transition method applied by the Group in the transition period to the provisions related to transition, Recalculation of the right of use assets and related financial lease liabilities recognised in the consolidated financial statements by using rates such as interest rate, rent increase rate etc. for the selected lease contracts that are in scope of TFRS 16, Evaluating the compliance of inputs used in the calculation like rent increase rate, interest rate etc for these selected contracts, Selecting the lease contracts used in the calculation of right of use assets and financial lease liabilities on a sample basis and testing the compliance of the term of the lease contacts and the assessment of the extension options applied if such options exist with the provision of the contract, Testing the disclosures in the consolidated financial statements in relation to the application of TFRS 16 and evaluating the adequacy of such disclosures, Evaluating the compliance of disclosures in consolidated financial statements to TFRS.