ÇELEBİ AR19-270720 (1)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 ÇELEBİ HAVA SERVİSİ ANONİM ŞİRKETİ (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.) Convenience Translation into English of Consolidated Financial Statements Originally Issued in Turkish 64 Çelebi Ground Handling Inc. 2019 Annual Report Impact of the new definition of a lease The Group made use of the practical expedient available on transition to TFRS 16 not to reassess whether a contract is or contains a lease. Accordingly, the definition of a lease in accordance with TAS 17 and TFRS Interpretation 4 continue to apply to those leases entered or modified before January 1, 2019. The change in definition of a lease mainly relates to the concept of control. TFRS 16 distinguishes between leases and service contracts on the basis of whether the use of an identified asset is controlled by the customer. Control is considered to exist if the customer has: - The right to obtain substantially all of the economic benefits from the use of an identified asset; and - The right to direct the use of that asset. The Group applied the definition of a lease and related guidance set out in TFRS 16 to all lease contracts entered into or modified on or after January 1, 2019 (whether it is a lessor or a lessee in the lease contract). Impact on Lessee Accounting Operating leases TFRS 16 changes how the Group accounts for leases previously classified as operating leases under TAS 17, which were off‑balance sheet. On initial application of TFRS 16, for all leases (except as noted below), the Group has: a) Recognised right‑of‑use assets and lease liabilities in the consolidated statement of financial position, initially measured at the present value of the future lease payments; b) Recognised depreciation of right‑of‑use assets and interest on lease liabilities in the consolidated statement of profit or loss; c) Separated the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within operating activities) in the consolidated cash flow statement. Lease incentives (e.g. rent‑free period) are recognised as part of the measurement of the right‑of‑use assets and lease liabilities whereas under TAS 17 they resulted in the recognition of a lease liability incentive, amortised as a reduction of rental expenses on a straight‑line basis. Under TFRS 16, right‑of‑use assets are tested for impairment in accordance with TAS 36 Impairment of Assets.This will replace the previous requirement to recognise a provision for onerous lease contracts. For short‑term leases (lease term of 12 months or less) and leases of low‑value assets (such as personal computers and office furniture), the Group opted to recognise a lease expense on a straight‑line basis as permitted by TFRS 16. As at January 1, 2019, the impact of TFRS 16 on the financial statements of the Group is disclosed in “the effects of accounting policy amendments” note.