IFRS 16 Lessor interest rate implicit

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Rustam
Posts: 8
Joined: 24 Sep 2021, 17:08

IFRS 16 Lessor interest rate implicit

Post by Rustam »

Hi everyone,
The lessor indicated the below market interest rate in the (finance) lease contract (Interest rate in the contract is 1%, market rate of borrowings is 18-20%).
The 1% interest rate meets the definition of interest rate implicit in IFRS 16.
"The rate of interest that causes the present value of (a) the lease payments and (b) the unguaranteed residual value to equal the sum of (i) the fair value of the underlying asset and (ii) any initial direct costs of the lessor."

The landlord and the tenant belong to the same person, but formally they are not related parties (In documents the owners are other people).

a) Can the Lessor use interest rate in the contract (1%) as effective interest rate in the accounting of the receivable? There are not direct costs.
b) Can the Lessee use interest rate in the contract (1%) to determine the lease liability and RoU?

Thanks for your answers!
Rustam
Posts: 8
Joined: 24 Sep 2021, 17:08

Re: IFRS 16 Lessor interest rate implicit

Post by Rustam »

Or should I to reflect this operation as a loan?
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Marek Muc
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Re: IFRS 16 Lessor interest rate implicit

Post by Marek Muc »

If this is an off-market lease you may consider recognising the off market part according to its substance. See the page below for inspiration:

https://ifrscommunity.com/knowledge-bas ... ate-loans/
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