Hello everyone!
I have the following questions about the lease of land:
1. If a Lessee leases a land, do they still depreciate the ROU even if the land is not a depreciable asset?
2. If a Lessee leases a land, then constructs a building, and then leases the building to others, is this considered sublease?
Thank you very much
IFRS 16: Lease of land
Re: IFRS 16: Lease of land
1. sure, you depreciate RoU, not the land, and RoU is a depreciable asset
2. I would say yes, because by leasing the building, you also lease the land, right?
2. I would say yes, because by leasing the building, you also lease the land, right?
Re: IFRS 16: Lease of land
1.If we depreciate the RoU , are not we in contradiction with IFRS16.31 "A lessee shall apply the depreciation requirements in IAS 16 Property, Plant and
Equipment in depreciating the right-of-use asset, subject to the requirements in paragraph 32" which states that land is not depreciated.
Equipment in depreciating the right-of-use asset, subject to the requirements in paragraph 32" which states that land is not depreciated.
Re: IFRS 16: Lease of land
Let's say that this is an exception allowed in IAS 16.58
Besides it wouldn't make sense not to depreciate RoU with land as the underlying asset. What would you do with this RoU after the lease term?
Besides it wouldn't make sense not to depreciate RoU with land as the underlying asset. What would you do with this RoU after the lease term?
Re: IFRS 16: Lease of land
Totally right and very well explained, thanks!
- Jessa Marie
- Posts: 11
- Joined: 14 Oct 2020, 09:39
Re: IFRS 16: Lease of land
Thank you very much for your quick response as always. Super helpful
Re: IFRS 16: Lease of land
hello guys,up bhulekh
The comment suggests that depreciating the Right-of-Use (RoU) asset might conflict with IFRS 16.31, which states that lessees should follow IAS 16 guidelines for depreciation. However, IAS 16 also specifies that land should not be depreciated, creating potential contradictions in the treatment of RoU assets under IFRS 16.
The comment suggests that depreciating the Right-of-Use (RoU) asset might conflict with IFRS 16.31, which states that lessees should follow IAS 16 guidelines for depreciation. However, IAS 16 also specifies that land should not be depreciated, creating potential contradictions in the treatment of RoU assets under IFRS 16.
Re: IFRS 16: Lease of land
What approach do you suggest?
Re: IFRS 16: Lease of land
The idea of not depreciating land is that is has inherent, perpetual value; but a lease of land is nothing to do with owning that perpetual value, in fact the exact opposite, it's the right to occupy it for a defined period of time. All whilst the owner continues to legally own it with all its inherent perpetual value.