IFRS 16 intercompany transfer of lease from one entity to another.

[Nelly]

This is a fairly new lease we started on one of the Europe entity in June 2023 and now we decide to transfer the lease to another intercompany entity in January 2024. I understand we can't do the intitial recognition of the lease in 2023 in the new company as the lease only starts in 2024. However, my question is should the lease term of this lease on the original Europe entity be reduced as it is only valid until 31st December 2023? Or should we leave the lease as it is and just do a transfer in Jan 2024 without changing anything in 2023?

[Marek Muc]

Which perspective are you considering? Consolidated financial statements? Also, please clarify the main terms of the lease and explain how the transfer affects them.

[Nelly]

I am considering the consolidated financial statements. The main term of the lease is 7 years however we are transferring it within 6 months. The transferor (legal entity) should only have the lease till 31st December 2023 and the transferee (legal entity) should have the initial recognition only from 1st Jan 2024.

[Marek Muc]

Any transfers between subsidiaries within the same group doesn't affect the consolidated financial statements, because everything occurs within the same group. However, if this transfer influences the group's assessment of the lease term, there might be an impact as discussed here: https://ifrscommunity.com/knowledge-bas ... assessment

Regardless, there won't any repeated initial recognition in consolidated financial statements.

[Leo]

might there be some slight impact on DTA/DTL if that involves two countries within different tax jurisdictions?

[Nelly]

Thank you for your response this helps.