IFSR 16 - Prepayments

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Aytaj
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Joined: 01 Aug 2022, 11:16

IFSR 16 - Prepayments

Post by Aytaj »

Hi all, can anyone help me? How will be accounting in the below cases for lessee:

1) Leasing term - 12 years
IBR - 10%
Annually payments in arrears

First 4 years were paid in advance on commencement date. I know that prepayments recognised in ROUA. But what will be lease liability on commencement date and how will be calculated interest charge?

2) Leasing term - 12 years
IBR - 10%
Annually payments in arrears

Lease liability and ROUA initially recognised as in IFRS 16. In the beginning of 3rd year next 4 years were paid in advance. How will we treat with liability and ROUA in this case?

(sorry for my grammar mistakes...)

Best regards
Leo
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Joined: 05 Apr 2020, 22:31

Re: IFSR 16 - Prepayments

Post by Leo »

Hi,

You should add it in the ROU and depreciate it accordingly.
Aytaj
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Joined: 01 Aug 2022, 11:16

Re: IFSR 16 - Prepayments

Post by Aytaj »

Hi, thank you for reply. Yes I know it. But what will be liability? 4 years were paid in advance, that is why, should we discount future lease payments for remained 8 years or how? If yes, how calculate interest charge? Because I tried it, but at the end of lease term liability has not become to zero.
And in 2nd case, should we adjust liability?
I would be greatful if you help me.
JRSB
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Re: IFSR 16 - Prepayments

Post by JRSB »

Why isn't the lease liability zero after the final lease payment is made?
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Marek Muc
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Re: IFSR 16 - Prepayments

Post by Marek Muc »

If you prepaid several years, then RoU will be higher than the lease liability as the prepaid amount will obviously be excluded from lease liability. If you can't arrive at nil lease liability at the end of lease term, then you need to double check your formulas in your spreadsheet. Use the excel files available in our knowledge base as your templates.
Aytaj
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Joined: 01 Aug 2022, 11:16

Re: IFSR 16 - Prepayments

Post by Aytaj »

I attached sample. İf it is not a problem for you, can you show me where I went wrong?
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İFRS 16.png
Leo
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Re: IFSR 16 - Prepayments

Post by Leo »

Your PV of liabilities should be 1 822. 2668 is the value that you should have at the end of year 4.

A tip, always verify if the total expenses in the P&L equal the total payments.
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Aytaj
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Joined: 01 Aug 2022, 11:16

Re: IFSR 16 - Prepayments

Post by Aytaj »

Thank you so much. İ realized my mistake. And thanks for creating such a platform.
Best regards
ramica
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Joined: 16 Feb 2024, 10:57

Re: IFSR 16 - Prepayments

Post by ramica »

If the lease started in October, how would the interest be calculated? I tried apportionment of 2/12 but then the figures got distorted and could not arrive to zero at the end of the lease term.
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Marek Muc
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Re: IFSR 16 - Prepayments

Post by Marek Muc »

@ramica - please start a new topic, describe the scenario, and explain what you're trying to achieve
ngadidala@gmail.com
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Re: IFSR 16 - Prepayments

Post by ngadidala@gmail.com »

Advance Payments are PVed with '0' days. So this value of 2667 is after deducting 2000 from total value of 4667 as this amount is paid day 1.
ROU definition per IFRS16 is PV of Lease Payments remaining after the lease start date +/- Prepayments and other adjustments.

Your liability if 2667 shall be amortized on a go forward basis like any other payment structure.
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