IFRS 16 Flashcards
What should lessee initially recognise? (aspects of lease)
The right-of-use asset and lease liability
RIght-of-use asset measurement?
Measured at amount of lease liability + initial direct costs incurred by lessee + deposit paid
Examples of initial direct costs incurred by lessee?
Lease liability
Estimated costs for dismantling
Payments less incentives before commencement date
Lease liability measurement? (PV)
Measured at PV of lease payment payable over lease term, discounted at rate implicit in lease
Subsequent right-of-use asset measurement?
Cost - accumulated depreciation
Subsequent lease liability measurement?
Financial liability at amortised cost
What is depreciation for right-of-use asset based on?
Depreciation based on earlier of useful life and lease term
Lessor agreeing to reimburse is?
A lease incentive
Right-of-use asset initial double entry?
Debit Asset PV amount
Credit Liability PV amount
PV amount adjustments?
Add direct inital costs
Add Other direct costs (Initial payment)
Subtract incentives received
What is charged to SPL?
Interest + Depreciation charge
How should profit be treated in a sale and leaseback?
Recognise proportion relating to right-of-use transferred
Payment in arrears treatment?
Deducted from the present value
What goes in SFP?
Right-of-use
Lease liability
Calculate right-of-use asset for every year SFP?
Deduct depreciation from carrying value every year
What goes in SPL
Interest
Depreciation
How is depreciation calculated?
PV after adjustments / useful life
Short-term lease?
Payment * months covered/length of lease
Calculate liability in advance
present value (no cash payments) - annual lease payments + interest (SPL) = c/f (SFP)
How is non-current liability calculated?
b/f - current liability
When does a sale and leaseback transaction occur/
When seller transfers an asset to a buyer who then leases asset back to seller (lessee)
If transfer is not sale (seller-lessee)
Continue to recognise asset (at CV and then depreciate)
Recognise financial liability (= proceeds)
If transfer is not sale (buyer-lessor)
Do not recognise the asset
Recognise financial asset (= proceeds)
What is the company that sells the asset referred to as?
Seller-lessee. As whoever sells must lease it back
If transfer is sale (seller-lessee)
Derecognise the asset. Recognise sale at FV
Recognise lease liability (PV of lease rentals)
Recognise right-of-use asset (whjat it’s wroth based on proceeds received and what previous carrying value was)
Gain/loss transferred to buyer
What does performance obligations not satisfied mean?
No sale
What does performance obligations satisfied mean?
Sale
Recording proceeds in a sale?
Debit Bank
Derecognise asset in a sale?
Credit Asset (CV amount)
Record liability in a sale?
Credit liability (PV amount)
Right of use asset in a sale?
Proceeds - PV = Transferred (OPTIONAL)
Previous CV * (percentage of (PV/Proceeds))
Gain/loss for SPL
(Proceeds - liability) - (Derecognise asset - right of use asset)
If proceeds are less than fair value of asset or lease payments are less than market rental (below market terms)
Accounted for as a prepayment of lease payments
If proceeds are less than fair value of asset or lease payments are less than market rental (above market terms)
Accounted for as additional financing provided to lessee
Period for depreciating a right-of-use asset?
Commencement of lease to shorter of end of lease term and end of useful life for plant
Lease liability included for one year?
PV + interest
How are lease instalments accounted for?
As current liabilities
What is meant by in arrears?
Payments are made at the end of the lease period. Subtracted from PV
What is meant by in advance?
Payments are made at the start of the lease period. Subtracted from PV
Calculate gain on rights retained?
Gain * (PV/Fair value)
Calculate gain on rights transferred
Total gain - gain on rights retained
What is done pro-rata
Interest
Depreciation
Elements of lease
Right to control
Identified asset
Period of use
Right of control in a lease characteristics?
Obtain substantially all economic benefits from an asset
Identified asset in a lease characteristics?
A similar asset cannot be used as a substitiute for the original asset
Period of use characteristics?
Lease may only be for a portion of contract’s term
Right-of-use asset initial measurement?
Initial measurement + Payments made before or at commencement date - incentives received + Initial direct costs + PV costs of dismantling, removing and restoring site
Control in right-of-use asset?
Substantially all economic benefits from identified asset use
What represents short-term leases?
Leases under 12 months
Equation if transaction is sale (rights retained) (sale and leaseback)
Carrying amount * (Present value of future lease payments/FV) = Gain relating to rights retained
Calculation of total gain (sale and leaseback)
Fair value (=proceeds) - carrying amount
Equation if transaction is sale (rights transferred) (sale and leaseback)
Total gain - rights retained
Adjustment required to account for gain on sale in profit or loss?
Rights retained
Amount of gain that can be recognised in profit or loss?
Rights transferred
DEPRECIATION CHARGED TO?
STATEMENT OF PROFIT AND FUCKING LOSS
Why do we add an extra year for a lease liability?
To calculate the current liability for the lease payment
PVFLP
Present Value of Future Lease Payments
Payment in advance treatment for a lease liability?
Included after (lease PV + finance cost) is determined. Is not included in carrying amount at
Rights of use retained initial measurement?
Carrying amount * (PV/FV)
Gain transferred to buyer initial measurement?
Total gain - gain relating to right-of-use retained
FV - CV - (FV - CV * (PV/FV). This is a gain on disposal
