Guys,
Please help me here......
Consider this example:
On the day of activation of Finance Sublease, the values are as follows:
Head Lease Right of Use value=100,000 (WDV of ROU asset on Sublease activation)
Percentage of Sublease=100%
Sublease Net Investment (NIV) (this is a calculated value which is Present Value of Lease Payments on Sublease) =120000
Gain/Loss=20000
We plan to generate accounting during activation of Sublease as follows:
Sublease Clearing ………Dr 100000
Right of Use Asset………Cr 100000(following derecognition per IFRS 16)
Net Investment………….Dr 120000 (following recognition per IFRS 09)
Sublease Clearing ……..Cr 100000
Gain on Sublease……….Cr 20000 (per IFRS 16)
Lets say after 10 months, Sublease is getting terminated and as on that day, remaining Net Investment value is amortized and brought down to 60000 (Netinvestment is brought down with payment and added with interest every month)
I am thinking the following accounting seems to be correct
Sublease Clearing ………….Dr 60000
Net Investment ………..……Cr 60000 (following derecognition per IFRS 09(FMV))
Right of Use Asset………….Dr 60000 (I am assuming the carrying value of Net Investment asset is moving from one Financial Asset into another Financial Asset. Hence it will borrow this value from Net Investment. Secondly what gives strength to my analysis is when a Finance Lease is terminated per IFRS 16/ASC 842, Fixed Assets get the Present Value of remaining receivables in Finance Leases as new re-recognition value for the asset)
Sublease Clearing…………..Cr 60000