Maintenance and consistent application

Date recorded:

Lease Liability in a Sale and Leaseback—Transition, Early Application and Due Process (Agenda Paper 12A)


At its April 2020 meeting, the Board tentatively decided to propose a narrow-scope amendment to IFRS 16. This amendment would specify how a seller-lessee applies the subsequent measurement requirements of the standard to the lease liability arising in a sale and leaseback transaction.

The staff asked the Board to vote on their recommendations.

They also asked the Board whether: any member intends to dissent from the publication of the Exposure Draft; they are satisfied that staff has complied with all due process steps and if the balloting process can begin.

Questions 1 and 2

  • 1. Transition — does the Board agree with our recommendation to require seller-lessees to apply the proposed amendment to IFRS 16 retrospectively in accordance with IAS 8, except when that application to lease modifications and changes in the lease term is possible only with the use of hindsight? In that case, the seller-lessee should determine the expected payments for the lease at the date it first applies the proposed amendment.
  • 2. Early application —does the Board agree with our recommendation to permit a seller-lessee to apply the proposed amendment earlier than the effective date?

Discussion and voting

One Board member suggested that, in drafting, it be clarified that retrospective application be utilised only for sale and leaseback transactions to which IFRS 16 was applied. The staff agreed.

When asked to vote, 13 Board members voted in favour of the staff recommendations with one absent.

Questions 3 – 5

  • 3. Comment period — does the Board agree with the recommendation to allow a comment period of no less than 120 days for the exposure draft?
  • 4. Dissent — does any Board member intend to dissent from publication of the exposure draft?
  • 5. Permission to ballot — is the Board satisfied that it has complied with the applicable due process steps and that it should begin the balloting process for the exposure draft?

Discussion and voting

One Board member questioned whether a shorter comment period would be appropriate given that the amendment could be seen as urgent to entities who have adopted IFRS 16. Staff reiterated their thinking laid out in the paper and stated that, given the current environment, the issue would not necessarily be viewed as urgent.

Another Board member repeated their concern raised at a previous meeting and stated that they intended to dissent if the BC accompanying the amendment failed to clarify the conflict being solved by the amendment.

When asked whether staff should be given permission to ballot, 14 Board members voted in favour.

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