Notes to the Consolidated Financial Statements (continued)

7. Leases (continued) Operating lease Group as a lessor:

The Group leases its investment property and inventory property. The Group has classified these leases as operating leases because they do not transfer substantially all of the risks and rewards incidental to the ownership of the assets. Note 5 sets out information about the operating leases of investment property. These leases have terms of between 8 to 15 years. All leases include a clause to enable upward revision of the rental charge on a triennial basis according to prevailing market conditions.

The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments to be received after the reporting date:

8. Inventories

‘Freehold land’ is land owned by the Group in perpetuity.

‘Leasehold land’ is land held on a 150-year lease with the Public of Jersey. ‘Leasehold building’ includes Waterfront Leisure Complex which was transferred from Investment Property during the year. Refer Note 5 for further details.

‘Freehold land’ and ‘Leasehold land’ includes the professional fees and other expenses incurred to obtain planning and building consents on various commercial and residential buildings.

‘Property under construction’ relates to the construction costs, professional fees and directly attributable costs for construction of IFC 6.

8. Inventories (continued)

Assessment of Net Realisable Value (“NRV”)

Inventories are carried at the lower of cost and NRV. The NRV is the estimated selling price in the ordinary course of business less costs to complete the development and selling expenses. The valuation techniques used to determine the NRV are set out in Notes 2.7 and 3.

The Company's professional cost consultants provide cost information, and this information, together with other costs and the sales evidence, is appraised by the Deputy CEO and Finance Director, who report to the Audit & Risk Committee. Discussions of valuation processes and results are held between the Audit & Risk Committee and the Directors bi-annually.

Impairment of Inventory Costs

During the year 2022, inventory impairment amounted to £1,405,122 relating to IFC 6 due to a slippage of yield and rising finance costs during the build period.

In 2021, inventory impairment amounted to £200,769, relating to design fees for Key Opportunity Site 3 (KOS 3). KOS 3 represents 30% of the masterplan.

The Board concludes that the NRV of all other inventory is greater than its carrying value as at 31 December 2022. Following the calculation of the NRV, the Directors undertake a sensitivity analysis to determine the associated risks to changes in market conditions. This process analyses changes to sales value for unsold residential units / unlet office space.

The Board concluded that the NRV of all inventory was greater than its carrying value as at 31 December 2021, and a sensitivity analysis is not presented as its carrying value is unaffected by reasonable changes in inputs and assumptions.