Rental deposits - effective interest rate

All topics related to IFRS Standards.
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WMW
Posts: 4
Joined: 31 May 2022, 12:48

Rental deposits - effective interest rate

Post by WMW »

Hi,

I have a question related to the treatment of a lease rental deposit pertaining to the standards IFRS 9 / IFRS 16.

Being a lessee, I leased a store for running my retail business for period of 3 years. I have to pay rental deposit to landlord and the deposit will be returned by the landlord at the end of the lease term and do not carry any interest cost.

I would like to know if the rental deposit paid should be treated as non-current assets and accounted for at amortised cost? What effective interest rate I should use to discount the deposit amount to present value? Should I use the deposit interest rate of my company as reference discount rate?

Thanks in advance,
Leo
Posts: 908
Joined: 05 Apr 2020, 22:31

Re: Rental deposits - effective interest rate

Post by Leo »

WMW
Posts: 4
Joined: 31 May 2022, 12:48

Re: Rental deposits - effective interest rate

Post by WMW »

Thanks. But what interest rate I should use for discount?
Leo
Posts: 908
Joined: 05 Apr 2020, 22:31

Re: Rental deposits - effective interest rate

Post by Leo »

The one that if you put those monies in the bank, how much should you collect ? Maybe ask your bank ?
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