IFRS 16, IAS 16, and IAS 23: Timing of Depreciation of a Right of Use Asset and IAS 23 Capitalization

What is the interaction of IFRS 16, IAS 16, and IAS 23 when a right-of-use asset (RoUA) is used to construct an item of property, plant, and equipment (PPE)? Scenario Entity A enters into a contract for a ground lease of land and begins construction of a manufacturing facility where it will operate its manufacturing … Continue reading IFRS 16, IAS 16, and IAS 23: Timing of Depreciation of a Right of Use Asset and IAS 23 Capitalization

Effects of the COVID-19 on 2020 Reporting Periods

For reporting periods ending on or after 31 January 2020, the effects of the COVID-19 would need to be incorporated into the preparation of financial statements. The financial reporting implications will depend on the facts and circumstances of each entity. The following are some of the financial reporting considerations that entities and engagement teams need … Continue reading Effects of the COVID-19 on 2020 Reporting Periods

IFRS 16 and Short-term Leases

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). If the entity elects to take the exemption, lease payments are recognized as an expense on a straight-line basis over the lease term or another systematic basis. The short-term lease exemption must be applied consistently to all … Continue reading IFRS 16 and Short-term Leases

IFRS 16 – Substitution Rights

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 consideration. In applying the definition of a lease, there are several criteria that must be met: There is an identified assetThe lessee obtains substantially all the economic benefitsThe lessee … Continue reading IFRS 16 – Substitution Rights

IFRS 16 and COVID-19 related rent concessions

On 28 May 2020, the IASB issued amendments to IFRS 16, which provide relief for lessees in accounting for rent concessions granted as a direct consequence of COVID-19. Normally this type of rent concessions would meet the definition of a lease modification, which requires lessees to remeasure the lease liability based on the revised consideration … Continue reading IFRS 16 and COVID-19 related rent concessions

IFRS 16 – Leases of Low Value Assets

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

IFRS 16 – Lease Modifications

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

IFRS 16 – Sale & Leaseback

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