IFRS 16 & IFRS 15 for Interconnected purchase & SALT

[Ketan Marwah]

Hello Community,

Wanted to seek an advice on interconnected asset purchase from a lessor - 'A' (by executing the purchase option) and subsequent sale & leaseback transaction (SALT) from the different lessor - 'B'. Under what circumstances would you think that the party in between could be treated as an agent i.e. the one purchasing the assets and selling it over to the different lessor from whom it is leased back? My mind was wandering towards IFRS 15 criteria's for principal/agent distinction so the question mainly is that whether you agree that the party can avoid the elaborated application of IFRS 16 regarding sale and leaseback transaction and if yes, then the guidance related to principal/agent distinction available in IFRS 15 could be used as the party is basically buying and flipping over the asset?

[Marek Muc]

A similar scenario is discussed in IFRS 16.B46-47. To me, it seems possible to avoid sale and leaseback accounting if the initial contract with lessor 'A' is made just before exercising the purchase option and entering into the SALT with lessor B.

[Ketan Marwah]

Thanks Marek and assuming that is treated as a standard lease, there would be no adjustment for the off market terms. I don't find a reference anywhere in the standard which requires to adjust for the off market terms except when it is a SALT. Would you agree?

[Marek Muc]

I'm not sure what kind of adjustment you have in mind, can you clarify a bit more?