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4.6 Finance lease liabilities
Accounting policies
The Group acts as both lessor and lessee of real estate and machines. Leases in which risks and rewards incidental to ownership are not transferred to the lessee are classified as operating leases. Lease payments related to them are recognised in the income statement on a straight-line basis over the lease term.
Leases that substantially transfer all risks and rewards incidental to ownership to the Group are classified as finance leases. An asset leased under a finance lease is recognised in the balance sheet at the lower of the fair value at the inception date and the present value of minimum lease payments. The lease obligations of finance leases are recorded in interest-bearing liabilities in the balance sheet. Lease payments are recognised as finance costs and a decrease in the liability. Assets acquired under finance leases are depreciated over the shorter of the useful life of the asset and the lease term.
In sale and leaseback transactions, the selling price and the future lease payments are usually interdependent. If a sale and leaseback transaction results in a finance lease, any proceeds exceeding the carrying amount are not immediately recognised as income. Instead, the amount is recognised as a liability in the balance sheet and amortised over the period of the lease. If a sale and leaseback transaction results in an operating lease and the transaction was executed at fair value, any profit or loss is recognised immediately.
If the selling price is less than fair value, any profit or loss is recognised immediately, unless the loss is compensated by future lease payments at below market price, in which case the loss is deferred and amortised over the period for which the asset is expected to be used. If the selling price exceeds fair value, the excess over fair value is deferred and amortised over the period for which the asset is expected to be used. If fair value at the time of a sale and leaseback transaction is less than the carrying amount of the asset, a loss equal to the amount of the difference between the carrying amount and fair value is recognised immediately.
2017 2016
€ million Minimum lease payments Future finance charges Present value of minimum lease payments Minimum lease payments Future finance charges Present value of minimum lease payments
Lease payments to be paid
Within 1 year 3.5 0.0 3.5 3.1 0.2 2.9
Later than 1 year and no later than 5 years 7.7 0.3 7.4 6.0 0.6 5.4
Later than 5 years 0.1 0.0 0.1 0.1 0.0 0.0
Total lease payments 11.3 0.3 11.0 9.1 0.7 8.4
Expected sublease payments - 0.3
Financial lease liabilities mainly comprise cars and warehouse technology leased by the Group from finance companies.