Here is hoping it comes up in the exam! I’ll be working on that later this year, as I’m still a full-time mom of a little baby. Then you need to: https://www.vistra.com/insights/lease-accounting-pursuant-ifrs-16-vs-ias-17 Tiêu chuẩn này đưa ra các hướng dẫn để nhận biết và yêu cầu công bố tiếp theo đối với hợp đồng thuê (thỏa thuận trong đó một bên thuê đất, xây dựng, vv cho một bên khác). The cost of the structural works in that building for setting up bank is 100,000, which will be borne by the bank. S. Dear Silvia Summary. Hi slay, The 376 difference, where does that go in the Balance sheet? yes, you do need to apply some judgement here, but the guidance says that the examples of items with low value are computers or items of furniture – so you get the point. I am asking because of performance ratios, such as current assets/current liabilities, that may be impacted for the worse. It is a joke, a game, and is very sad the accounting standard boards continue to do this. Hendrie, Ryan. unearned Finance Income Hi Anna, We try to ensure credibility. IFRS 16 là gì 4. Hi Silvia, Ringkasan - IAS 17 vs IFRS 16 Perbedaan antara IAS 17 dan IFRS 16 memberikan contoh yang bagus tentang bagaimana perlakuan akuntansi untuk berbagai masukan dan keluaran dalam bisnis dikenai perubahan dari waktu ke waktu ketika standar baru tersedia sehingga yang … S. In case of a business combination done in earlier years we have created certain intangible assets (which represents right to use certain property rights for generating revenue for our business). However, it is very similar to the old definition in older IAS 17 (differences do exist). 2516 ได้แนะนำชุดมาตรฐานการบัญชีที่ชื่อ Thank you for this wonderful article. Hi Silvia, IAS 17 là gì? You should take 2 steps: It pays $75.000 a year and has an incremental borrowing rate of 5% (the rate implicit in the lease is not readily determinable). Side by Side Comparison – IAS 17 vs IFRS 16 Shall we consider this as a sub lease ? & Or should I account them under PPE at inception? Will it be from January 2019 or depending on the tenant’s year end? Thanks for your useful video. dr. cash 1000 Hi Michael, I am dealing with the same case. I’ll show you how in the next paragraphs. The IASB met via video conference on 4 February 2021. As a result of implementing IFRS … Regarding accounting treatment, should the rental expenses be booked as per actual rental cost payable or should it be on a straight line basis over the term of the lease by taking into account 10% increment on rent amount every 2 years. As usual, you make a complicated topic very simple. Hi Silva, By using our website, you agree to the use of our cookies. Hi Silvia, Lease of assets of a low value (such as computers, furniture etc.). Please see this IFRS Q&A session, it will help. Is IFRS16 applicable to that case? Usually lease office contract will be described in here. A parent company has a contract for lease of building office with the lessor. However, the right-to-use asset is not exactly the same as an underlying asset. Hi Silvia, Thank you, Mahmoud! For your other questions, it is too long to respond in the comment, but please check this article and also this one, they will help. In this case, we do not need this anymore? Yes, Bander, that’s wrong – I have no idea what you have calculated. Hi rsh, thank you! He was a little bit hesitant but in the end confirmed that rent office should be out of scope since there is no option to purchase the office. My second question is when i enter into a new contract with the lessee and pay a deposit, do i include the deposit on the straight lining ? IFRIC 12 is excluded from IFRS 16 and I cannot find any other standard addressing this issue. I guess your clients follows IAS 17 rather than IFRS 16 as it’s completely new. Example- A bank has opened a branch at a building, by signing a rental agreement with the landlord of the building on which branch is situated. Can you help here as well? In this case, which accounting treatment shall be applied? But would like to ask, in practice/real life, where do we get the discount rate to calculate the lease? The new IFRS 16 introduces a new definition of a lease. Under IFRS 16, the impact on profit or loss in the year 1 was: Hmmm, that’s actually more expenses in the first year under IFRS 16 than under IAS 17, isn’t it? In IFRS 16 stated, if the company adopt IFRS 16, they also need to adopt IFRS 15 earlier or at the same time. Cr. Hi Silvia I would like to know how to calculate the lease liability and right of use asset with the following conditions: I’m not the right person to respond to this question, sorry I just take the rules as they are and try to play with the cards I have. Dear Petter, in practice, you would calculate the discount rate as the rate implicit in the lease. Thank you so much for the awesome job on these new IFRSs. Under old IAS 17, it did not matter so much whether you have an operating lease contract or a service contract, for a very simple reason: you probably accounted for both types of contracts in the same way (that is, as a simple expense in profit or loss). S. Hi Silvia, What happens to the lease liability? Under IFRS 16, i may account the Right-of-Use of assets (“ROU”) and depreciate over 20 years with i account the lease liabilities over 5 years. Dili has a professional qualification in Management and Financial Accounting. Now with the IFRS 16, do we need to capitalise these operating lease commitments irrespective of the fact that we have already accounted them as intangible assets at the time of business combination or is there any relief available in IFRS 16. . Lessee is responsible for providing driver and fuel only. Or does the land owner have to recognise a revenue over 99 years? IFRS 16 impacts the lessee’s P&L where they have previously classified leases as operating leases. 2) Since this is an inter-company transaction, there will be no implicit interest rate that has been included in the rental agreement. approach? IFRS 16 contains an exception for “operating leases” for lease agreements not recognised in the balance sheet in accordance with IAS 17. I have a question about lease of land. I remember attending one of the seminar in my country. I am doing a presentation on ifrs 16 and i have been asked to address the provisions of ifrs 16, what exactly are these provisions? Hi Silvia, We have instances in our company where a lease is entered into then prepaid in full for all outstanding payments at inception, how does this affect the right of use calculation/lease liability calculation? S. Thank you for the insightful details and example. Why creating a fuss over nothing?? Your article is very helpful. It’s worth adding it. I have a question on sale and leaseback-Transition part. You pay still the same amounts whether you apply IAS 17 or IFRS 16. I have really been so enlightened reading you interpretations to IFRS. well, hire purchase is very similar to the finance lease, isn’t it? How did you get CU23,341? IASB Meeting — 4 February 2021 (Supplementary) Start: 04 Feb 2021-End: 04 Feb 2021. Allocate CU 8 571 (CU 9 000/(CU 9 000+CU 1 500)) to the lease element and account for that as for the lease; and. Under IAS 17, lessees needed to classify the lease as either finance or operating. It is a little bit mindblowing for me. Keep writing silvia. It’s a non-monetary asset, similarly as PPE or intangible asset and no, you do not revalue it at the year-end. As the purpose of IFRS 16 is to elimanate the use of “off balance sheet leases”, if a company traet an asset which is leases for every year as “one year contract”, it is recorded as operating laese because it is a contract foa 12 months (excption 1). report “Top 7 IFRS Mistakes” I recommend reading the paragraph IFRS16.B34 for the reference. Posted on 2 May 2019 29 July 2019 by finlearnhub in C3 - IFRS 16. Yes, of course, there can be such circumstance. The key difference between IAS 17 and IFRS 16 is that according to the old standard (IAS 17) operating leases are not capitalized whereas they are considered as capitalized assets and recorded in the balance sheet under IFRS 16. But, some operating leases were non-cancellable, and therefore, they represented a liability (and an asset) for the lessees. In our group of companies (60 companies) all companies enter the lease cost into their legal books in the P/L. Perbedaan antara IAS 17 dan IFRS 16 memberikan contoh yang baik tentang bagaimana perlakuan akuntansi untuk berbagai input dan output dalam bisnis dapat berubah seiring waktu ketika standar baru menjadi tersedia membuat yang lama digunakan terbatas. It basically depends on the conditions of the contract, but sometimes, hire purchase qualifies for lease accounting. 3: Low Value Thresholds. IFRS 16 vs. IAS 17 – Presentation. IAS 17 Leases (developed by the International Accounting Standards Committee) is currently being replaced by IFRS 16 Leases (developed by the International Accounting Standards Board). In the table Summary of accounting entries under IFRS 16 we may therefore need to reverse these entries before proceeding to the booking of IFRS 16 postings in order to avoid recognizing twice the cost (once through depreciation, and once through invoice). As at now, we treat them as operating leases. – IFRS 16, Leases is effective for companies from 1 April 2019 in! Now I want to ask if there is a circumstance where Right Of Use asset will be higher than Lease liability since we have to recognize ROU asset in the amount equal to Lease liability plus some other items like initial direct cost if any. To your last question – yes, there can be different discount rates for leases, but it’s not a leased asset that makes a difference. The implicit rate and Honey’s incremental borrowing rate is 8% per year. It’s very very very easy to understand. Do you see any other way to avoid such reversal mechanism as it may be really complex of you have to go through different allocations process (from analytical accounting and costing point of view), Dear Silvia, I would like to first thank you for demystifying IFRSs that seemed to be complicated. Is gain still required to be accounted for in the same way like in IAS-17? IFRS 16, along with the remaining suite of standards that are applicable subsequent to IFRS 16 being adopted are collectively referred to as “IFRS 16”. Please read more here: IAS 17 Leases. Dear Raja, Posted on 2 May 2019 29 July 2019 by finlearnhub in C3 - IFRS 16. yes, IFRS 16 affects you, because instead of accounting for prepaid rent, you have a right-of-use asset here, so you need to account for Debit ROU asset/Credit Cash (or lease liability, but if the full rent is prepaid, then just cash). dr. xxx Do we amortize the lease premium over the period of the lease agreement? Rental of RM38,000 per year at the end of each year. Do we credit ROUA and Debit Provision for onerous leases? We did it above: This simple table illustrates our example: Note: “b/f” means “brought forward (at the beginning of the year)”, “c/f” means “carried forward (at the end of the year)”. No doubt, most of the players have the “right intentions” but guess what, although regulation grew exponantially since the 30’s, the “scandals” got more severe and greater in numbers. When in doubt, i read your posts for guidance. In terms of IAS 17 operating lease, can the lessee capitalise the lease improvements made? This place is assigned to you and no one can change it during the duration of the contract. My point is that if you add the value of asset recorded on the lessor balance sheet + the right of use asset on the lessee book , it is not equal to the actual value of the asset. And how should the accounting and disclosure be done as per IAS 17 and IFRS 16? Here, no classification is necessary as one accounting model applies to all leases. after IAS 16 was implemented? Will that be 25,713 x 95%? this article was written to give a word of warning in order to prepare – it’s by no means exhaustive. They need to justify the money they get paid by changing the accounting standards frequently. “The difference between IAS 17 and IFRS 16: How lease accounting is changing.” Innervision. Thanks for your simple yet informative post. also after payment if the ownership has been transferred to the buyer then lessor can show it as profit and de-recognized it as a sale . Diferença-chave - IAS 17 vs IFRS 16 O Comitê Internacional de Normas Contábeis (IASC), fundado em 1973, introduziu uma série de normas contábeis denominadas Normas Internacionais de Contabilidade (IAS) que estavam na prática até a incorporação do International Accounting Standards Board (IASB ) … What are the effects under IFRS 16 for above two balances? is this the same with the previous amortization of the lease liability under PAS 17? The lessee records the expense of monthly payments, however with the implementation of IFRS 16, the lessee will also recognize the asset and liability in its books. Your explanation with example is really easy to understand. Very shortly: This model is very similar to the accounting for finance leases under IAS 17. In this case you need to calculate the present value of 3 payments of CU 8 571 (only lease element) at 5%, which is CU 23 341”. Will it also be included under PPE in the Lessee’s books? The speaker was senior auditor in KPMG. I hope analysts do. exactly as you say. Parent is lessee in head lease and lessor in sub-lease. S. Great explanation and much appreciated. Terms of Use and Privacy Policy: Legal. Thank you so much, you have made this article. If you are adopting IFRS 16 from IAS 17, you have to state the balances as if IFRS 16 has always been adopted. When the lease payments change, you recalculate your lease liability with new payments and account for the adjustment. Can you please explain why this is? have asked your account assistant, who is controlling the transaction of vehicle from Axia The IAS 17 vs IFRS 16 Leases. I am bit confused by your point that is, IFRS16 does not affect Lessors books, however i need to clarify following points: does the Lessee depreciate it? I take it that under IFRS16, both lease and asset will be classified as long term assets since it will over 12 months anyways. The tenure of the agreement can be extended at both parties consent.The bank has no intention to discontinue the branch operations in near future. What happens to the IAS16 smoothing balance sheet item, do we release it to the income statement. substance over form) has been effectively transfer to the entity, the entity finance the assets by way of installment plans. And if there’s a change in payments, then you would need to account for the lease remeasurement. And, when doing this, you will book the cummulative adjustment in opening retained earnings (depending on which approach you take, whether modified or full).
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