29. Leases
The Group’s lease portfolio consists of 42 (2021: 35) significant property leases across the countries in which we operate. In addition, we lease approximately 104 (2021: 121) smaller properties, 757 (2021: 700) motor vehicles, and a small number of hardware assets. The average remaining lease term is 4.1 years (2021: 4.5 years) for significant property leases, 1.5 years (2021: 1.3 years) for other minor property leases and 1.9 years (2021: 2.0 years) for motor vehicles and plant and equipment. Extension and termination options are included within a number of property and equipment leases across the Group. These are used to maximise operational flexibility in terms of managing assets and lease exposures. The majority of extension and termination options are exercisable only by the Group and not by the respective lessor.
(a) Amounts recognised in the Group balance sheet
| Notes | 2022 US$m | 2021 US$m | |
| Right-of-use assets: | |||
| Land and buildings | 22 | 119 | 133 |
| Motor vehicles | 22 | 13 | 12 |
| Plant and equipment | 22 | 21 | 27 |
| At 31 March | 153 | 172 | |
| Lease obligations: | |||
| Current | 27 | 54 | 58 |
| Non-current | 27 | 126 | 144 |
| At 31 March | 180 | 202 |
During the year ended 31 March 2021 the Group derecognised right-of-use assets of US$13m due to sublease arrangements in North America. The lease receivable held in relation to subleases at 31 March 2022 was US$11m (2021: US$13m), of which US$9m (2021: US$11m) falls due after more than one year.
Lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the incremental borrowing rate is used. The incremental borrowing rate is unique to each country and class of assets therein and is based on the Group’s cost of debt, adjusted for factors specific to individual lessees and their borrowing capacity.
The Group is exposed to potential future increases in variable lease payments based on an index or a rate, which are not included in the lease obligation until they take effect.
(b) Maturity of lease obligations – contractual undiscounted cash flows
| 2022 US$m | 2021 US$m | |
| Less than one year | 60 | 58 |
| One to two years | 49 | 54 |
| Two to three years | 32 | 40 |
| Three to four years | 21 | 25 |
| Four to five years | 12 | 16 |
| Over five years | 29 | 37 |
| Total undiscounted lease obligations at 31 March | 203 | 230 |
(c) Amounts recognised in the Group income statement
| Notes | 2022 US$m | 2021 US$m | |
| Depreciation charge for right-of-use assets: | |||
| Land and buildings | 22 | 39 | 40 |
| Motor vehicles | 22 | 6 | 6 |
| Plant and equipment | 22 | 11 | 9 |
| Total depreciation charge for right-of-use assets | 56 | 55 | |
| Interest expense | 15 | 8 | 10 |
| Expense relating to the lease of low-value assets | 10 | 8 | |
| Total | 74 | 73 |
We had no material sublease income in the current or prior year.
(d) Amounts recognised in the Group cash flow statement
During the year lease payments of US$66m (2021: US$66m) comprised US$57m (2021: US$56m) for repayments of principal and US$9m (2021: US$10m) for payments of interest.
(e) Lease commitments
The Group’s commitments for lease agreements where the term has not yet commenced total US$2m (2021: US$1m); such amounts are not recognised as lease obligations or right-of-use assets.