IFRS16:32

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Neutral Booker
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Joined: 14 Sep 2020, 17:52

IFRS16:32

Post by Neutral Booker »

Dear colleagues, I want to hear your opinion.

IFRS16:32 "If the lease transfers ownership of the underlying asset to the lessee by the end of the lease term or if the cost of the right-of-use asset reflects that the lessee will exercise a purchase option, the lessee shall depreciate the right-of-use asset from the commencement date to the end of the useful life of the underlying asset".

Does this mean that after the purchase, the lessee continues to account the RoU asset in the balance sheet, but does not recognize PPE?
In other words, can an RoU asset be shown on the balance sheet if the lease has already been terminated?

Thank you
JRSB
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Re: IFRS16:32

Post by JRSB »

Isn't that just talking about the depreciation on said asset - in practice a transfer between asset classes would happen in presentation terms
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Marek Muc
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Re: IFRS16:32

Post by Marek Muc »

yep, I would reclassify from RoU to PP&E when the lease ends and ownership is transferred to the lessee
besides, IFRS 16 allows to (and many entities do) show RoU as part of PP&E
Neutral Booker
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Re: IFRS16:32

Post by Neutral Booker »

JRSB wrote: 07 Jul 2021, 09:24 Isn't that just talking about the depreciation on said asset - in practice a transfer between asset classes would happen in presentation terms
Thus, you believe that the text of the standard in this paragraph does not successfully convey the intent of the standart setter. Did I understand you correctly?
Neutral Booker
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Re: IFRS16:32

Post by Neutral Booker »

Marek Muc wrote: 07 Jul 2021, 09:55 yep, I would reclassify from RoU to PP&E when the lease ends and ownership is transferred to the lessee
besides, IFRS 16 allows to (and many entities do) show RoU as part of PP&E
However, in this case, we must understand that there are no specific rules for such reclassification in IFRS 16 and IAS 16. How will a lessee use the general guidance of IAS 16 to determine the cost of the PPE?
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Marek Muc
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Re: IFRS16:32

Post by Marek Muc »

I don't think you need the determine the cost of PP&E on reclassification, just carry on with the cost and carrying value of RoU
but it's true that there are no rules for such a reclassification
Neutral Booker
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Re: IFRS16:32

Post by Neutral Booker »

Marek Muc wrote: 07 Jul 2021, 10:30 I don't think you need the determine the cost of PP&E on reclassification, just carry on with the cost and carrying value of RoU
but it's true that there are no rules for such a reclassification
good. thank you very much.
kind regards
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