Lease Liability in a Sale and Leaseback [Completed]

Effective date:

The amendments are effective for annual reporting periods beginning on or after January 1, 2024. Earlier application is permitted.

A seller-lessee applies the amendments retrospectively in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors to sale and leaseback transactions entered into after the date of initial application.

Last updated:

September 2022

Overview

At its meeting on April 21-23, 2020, the International Accounting Standards Board (the Board) discussed a recommendation from the IFRS Interpretations Committee to amend IFRS 16 to specify how a seller-lessee would apply the subsequent measurement requirements in IFRS 16 to the lease liability that arises in a sale and leaseback transaction.

The Board tentatively decided to propose a narrow-scope amendment to IFRS 16 to specify that:

  • in applying paragraphs 36–38 of IFRS 16 to a sale and leaseback transaction with variable lease payments, a seller-lessee be required:
    • to determine the lease payments made (as described in paragraph 36(b)) as the payments included in the measurement of the lease liability. The payments included in that measurement are those that, when discounted using the discount rate described in paragraph 37, result in an amount equal to the carrying amount of the lease liability.
    • not to remeasure the lease liability to reflect any reassessment of future variable lease payments.
    • to apply paragraph 38 in accounting for any difference between the payments made for the lease and those included in the measurement of the lease liability.
  • in applying paragraphs 40 and 45 of IFRS 16 to lease modifications and changes in the lease term related to a sale and leaseback transaction, a seller-lessee be required to determine the revised lease payments as the revised expected payments for the lease.

The Board also tentatively decided to develop an additional example that would illustrate how a seller-lessee would account for a sale and leaseback transaction with variable payments, both at the date of the transaction and subsequently throughout the lease term.

On September 22, 2022, the IASB issued amendments to IFRS 16, Leases, which add to requirements explaining how a company accounts for a sale and leaseback after the date of the transaction.

 

Other Developments

September 2022

On September 22, 2022, the IASB issued Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) with amendments that clarify how a seller-lessee subsequently measures sale and leaseback transactions that satisfy the requirements in IFRS 15 to be accounted for as a sale.

July 2022

On July 25, 2022, the IASB staff updated the Work Plan to indicate that the Board plans to issue the final amendments to the IFRSs in September 2022.

April 2022

On April 29, 2022, the IASB staff updated the Work Plan to indicate that the Board plans to issue the final amendments in Q3/2022.

October 2021

On October 29, 2021, the IASB staff updated the Work Plan to indicate that the Board plans to decide the project direction at its meeting in December 2021.

June 2021

On June 24, 2021, the IASB staff updated the Work Plan to indicate that the Board plans to decide the project direction in Q4/2021.

May 2021

On May 28, 2021, the IASB staff updated the Work Plan to indicate that the Board plans to decide the project direction in Q3/2021. 

March 2021

On March 26, 2021, IASB staff updated the Work Plan to indicate that the Board plans to review the Exposure Draft Feedback in May 2021.

January 2021

On January 29, 2021, the IASB staff updated the Work Plan to indicate that the Board plans to review the Exposure Draft Feedback in Q2/2021.  

December 2020

On December 9, 2020, the AcSB issued its exposure draft that corresponds to the IASB’s Exposure Draft on this topic. Comments are requested by March 29, 2021. The AcSB would like input from Canadian respondents on the following additional question regarding the proposed amendments: The IASB has developed the proposed amendments in accordance with its due process for application around the world. Assuming the Exposure Draft proposals are finalized and approved by the IASB in accordance with its due process, do you think that the proposals are appropriate for application in Canada? If not, please specify which aspects of the proposals, and what circumstances, make the accounting requirements proposed in the Exposure Draft inappropriate.

November 2020

On November 27, 2020, the IASB published an exposure draft Lease Liability in a Sale and Leaseback (Proposed amendment to IFRS 16) that aims at clarifying how a seller-lessee should apply the subsequent measurement requirements in IFRS 16 to the lease liability that arises in a sale and leaseback transaction. Comments are requested by March 29, 2021.

September 2020

On September 28, 2020, IASB staff updated the Work Plan to indicate that the Board plans to issue an Exposure Draft in November 2020.

August 2020

On August 28, 2020, IASB staff updated the Work Plan to indicate that the Board plans to issue an Exposure Draft in Q4 2020.

July 2020

On July 23, 2020, IASB staff updated the Work Plan to indicate that the Board plans to issue an Exposure Draft in September 2020.

April 2020

At its meeting on April 21-23, 2020 the IASB added a project to its work plan to amend IFRS 16 to specify how a seller-lessee would apply the subsequent measurement requirements in IFRS 16 to the lease liability that arises in a sale and leaseback transaction.

 

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