Consolidate Bullets Lease For Free

A common approach is to estimate the amount of the incentive and its timing and then account for it as payable at lease commencement time. If there is a substantial difference between the estimate and the actual timing or amount of the incentive, the lease liability and ROU asset should be remeasured.

Example 24 illustrates the application of the requirements in paragraphs 99?102 of IFRS 16 for a seller-lessee and a buyer-lessor. An entity (Seller-lessee) sells a building to another entity (Buyer-lessor) for cash of CU2,000,000. Immediately before the transaction, the building is carried at a cost of CU1,000,000.

Operating lease incentives Examples of incentives include an up front cash payment to the lessee, reimbursement or assumption by the lessor of the costs of the lessee (such as relocation costs and costs associated with a pre-existing lease commitment of the lessee) and a rent free or reduced rent period.

Irrespective of its form, a lease incentive is part of the lease payments ? i.e. the net consideration for the lease. At the commencement date, a lessee measures the lease liability at the present value of the lease payments using the interest rate implicit in the lease if this can be readily determined.

IFRS 16 requires companies to reassess the lease term during the life of a lease contract in specific circumstances. This requirement and that to reassess other key estimates and judgements if the lease term changes, introduces financial statement volatility.

The lessor should recognise the aggregate cost of incentives as a reduction of rental income over the lease term. This should occur on a straight-line basis, unless another systematic basis is more representative of the time pattern over which the benefit of the leased asset is diminished.

IFRS 16 requires a lessee to include lease incentives in the measurement of both the right-of-use asset and the lease liability.? ? An entity agrees to enter into a lease arrangement with a new lessor. The lessor agrees to pay the lessee's relocation costs as an incentive to the lessee for entering into the new lease.

IFRS 16 requires that the lease liability should initially be measured at the present value of the lease payments that are not paid at the commencement date. The discount rate used to determine present value should be the rate of interest implicit in the lease.

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Select the entire bulleted list. Click Home, and then click Paragraph>Line Spacing. Choose the number of line spaces you want from the drop-down menu, or create custom line spacing by choosing Line Spacing Options....Change line spacing between bullets in a list Select the list.Click Home>Paragraph Dialog Box Launcher.