Diagram Currency Lease For Free

Illustrative examples 3 : IFRS 16 changes in the term of a lease: An entity agrees with another company to lease an asset. The contract establishes payments per year of 25,000 per year for five years. At the end of year 1, both entities extend the lease to agree to 7 years.

IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value.

Under IFRS 16 subleases are accounted for by the sub-lessor in the same way as other leases. Under IFRS 16 the head lease and a sublease are separate contracts that are accounted for under the lessee and lessor models. The sublease is classified by reference to the right-of-use asset.

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.

Ing to IFRS 16, the lease liability value is calculated with the following formula: The present value of the lease payments payable over the lease term. Discounted at the rate implicit in the lease.

IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value.

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.