IFRS 16 Contracts with Irregular Dates

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morfoulaisd
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IFRS 16 Contracts with Irregular Dates

Post by morfoulaisd »

Hello everyone and thank you for the useful information provided in the Forum.

I have to deal with lease contracts, which start and end on "irregular" dates and my Measurement Date (IFRS 16 Initial Recognition Date) is 01/01/2020. Let me give you a short example:

Contract starts on 06/04/19 and ends on 05/04/23, lease payments: 200$ and frequency of payment is "Monthly". Also, lease payments are due at the beginning of each period.

Now, my question is how I am supposed to calculate Present Value Table (I suppose with a daily discount approach between payment date and measurement date?), Depreciation and Amortization Tables. All of the examples I have seen, have a "regular" lease term, e.g. 01/01/18-31/06/22. Could you please help me with an illustrative example of the tables?

Thank you in advance.
JRSB
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Re: IFRS 16 Contracts with Irregular Dates

Post by JRSB »

Not the answer you want but personally I would calculate it as though 5 days earlier on the basis of materiality!
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Marek Muc
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Re: IFRS 16 Contracts with Irregular Dates

Post by Marek Muc »

the excel file below uses exact dates, you can use this one as your template:
https://ifrscommunity.com/wp-content/up ... ments.xlsx
morfoulaisd
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Re: IFRS 16 Contracts with Irregular Dates

Post by morfoulaisd »

Thank you for your answer. However, I was wondering what depreciation must be recognised if we take into consideration that a lease period is “split” between two fiscal years. For example,

In the aforementioned example, the Contract starts on 06/04/19 and ends on 05/04/23, which means that the first payment in 2020 would be 06/01/20 for the following month. The question is whether depreciation from the previous lease payment (06/12/19-05/01/20) should be recognised in the first 5 days of January, as they “cover” the previous lease term. And what happens with the interest of this period.

Thank you again !
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Marek Muc
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Re: IFRS 16 Contracts with Irregular Dates

Post by Marek Muc »

what do you mean by depreciation? depreciation of right-of-use asset?

interest expense is not directly linked to specific payments, you could have only one payment after 5 years but still need to recognise interest expense each year
morfoulaisd
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Re: IFRS 16 Contracts with Irregular Dates

Post by morfoulaisd »

Yes, I’m referring to the depreciation of ROU asset. ROU asset will be equal to the PV of unpaid lease payments which in our example start on 06/01/20. So, what about the portion of ROU asset in the first 5 days of January? Shouldn’t we recognise a depreciation amount for these days too?
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Marek Muc
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Re: IFRS 16 Contracts with Irregular Dates

Post by Marek Muc »

depreciation of RoU asset has nothing to do with how the payments are spread

https://ifrscommunity.com/knowledge-bas ... preciation
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