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UK Endorsement Board secretariat publishes draft comment letter on the IASB’s ED/2020/4 Lease Liability in a Sale and Leaseback

  • UK Endorsement Board (UKEB) Image

05 Feb 2021

The UK Endorsement Board secretariat has published its draft comment letter on the International Accounting Standard Board’s (IASB's) Exposure Draft (ED) ED/2020/4 'Lease Liability in a Sale and Leaseback'.

The proposed amendment aims to clarify how a seller-lessee should apply the subsequent measurement requirements in IFRS 16 Leases to the lease liability that arises in a sale and leaseback transaction. The amendment would also add two illustrative examples to IFRS 16.

In its draft comment letter the UK Endorsement Board secretariat:

  • Supports the proposals in the ED as they provide guidance on an area not covered by the existing Standard which should reduce diversity of practice leading to consistency and comparability of financial statements.
  • Supports the IASB’s view that the information necessary to estimate asset fair values and future lease payments is likely to be readily available, either from the process used to price and approve the sale and leaseback transaction, or from other sources.
  • Observes an inconsistency in the definition of a variable lease payment between that used in IFRS16 and that proposed in the exposure draft, which could lead to potential inconsistency in financial reporting.
  • Proposes two solutions to align the definition of variable lease payment and considers the consequences of each approach.
  • Supports the IASB's decision to require retrospective application.

Comments on the draft comment letter are requested by 1 March 2021. For more information, see the press release on the UKEB's website.

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