Variable payments fall under two major categories: Variable payments that depend on an index or a rateOther variable payments Variable payments that depend on an index or a rate – accounting treatment Include in the initial measurement of the lease using the index or rate as at the commencement date.Remeasure lease in the period the … Continue reading IFRS 16 – VARIABLE PAYMENTS
Entity C has a 5-year lease for the floor of an office building. It pays $75.000 a year and has an incremental borrowing rate of 5% (the rate implicit in the lease is not readily determinable). The tables below illustrate the impact on net income and EBITDA depending on whether IAS 17 or IFRS 16 … Continue reading IFRS 16 vs. IAS 17 – Presentation
IFRS 16 provides an optional exemption from the full requirements of the standard for: Short-term leases (leases with a lease term of 12 months or less)Leases for which the underlying asset is low value (e.g. tablet and personal computers, small items of furniture etc.). In this article we shall focus on the second exemption. The standard does not provide very much … Continue reading IFRS 16 – Leases of Low Value Assets
Lease modifications arise from changes to the underlying contract agreed between the lessee and the lessor subsequent to commencement of the lease. Under IFRS 16, the accounting for the modification depends on whether the modified terms increase or decrease the scope of the lease, and whether increases in scope require consideration to be paid that … Continue reading IFRS 16 – Lease Modifications
In a sale-and-leaseback transaction (‘SALT’), an entity (seller-lessee) sells an asset to another entity (buyer-lessor) who then leases it back to the seller-lessee. The accounting for a SALT under IFRS 16 is significantly different to that required by IAS 17. In order to determine the appropriate accounting treatment under IFRS 16, the sale must first … Continue reading IFRS 16 – Sale & Leaseback
In this article we shall focus our attention on an important question of IFRS 16. When does an agreement contain a lease? Under the new standard, a lease is a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for … Continue reading IFRS 16 – When does an agreement contain a lease?