IFRS 16 sub lease
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- Posts: 22
- Joined: 08 Jan 2020, 13:49
IFRS 16 sub lease
Hi
I have the following case in a group situation and will appreciate some guidance:
Company X has a contract to lease offices with the lessor which is a external party. Company X pays this rent to the external lessor.
Company Y, which is a fellow subsidiary of Company X, uses the warehouses of the building. Company Y pays monthly rent to Company X for the use of the warehouse.
There is no agreement between Company Y and the lessor and no agreement for cross charge between Company X and Company Y.
Will this constitute a sub lease between Company X and Y?
What is the correct accounting and disclosure for Company X and Company Y in their individual financial statements?
Thanks
I have the following case in a group situation and will appreciate some guidance:
Company X has a contract to lease offices with the lessor which is a external party. Company X pays this rent to the external lessor.
Company Y, which is a fellow subsidiary of Company X, uses the warehouses of the building. Company Y pays monthly rent to Company X for the use of the warehouse.
There is no agreement between Company Y and the lessor and no agreement for cross charge between Company X and Company Y.
Will this constitute a sub lease between Company X and Y?
What is the correct accounting and disclosure for Company X and Company Y in their individual financial statements?
Thanks
Re: IFRS 16 sub lease
No because either party can terminate with immediate effect by the sound of it.
Re: IFRS 16 sub lease
there is no contract, so it's hard to say what it is as there are no rights nor obligations...
a disclosure under IAS 24, and that's all probably
BTW, do you mind telling us which country is this happening in? There are no legal or tax issues because of payments being made without any underlying documentation?
a disclosure under IAS 24, and that's all probably
BTW, do you mind telling us which country is this happening in? There are no legal or tax issues because of payments being made without any underlying documentation?
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- Posts: 22
- Joined: 08 Jan 2020, 13:49
Re: IFRS 16 sub lease
In South Africa. Are there any guidance or illustratives available to see whether there is a sub lease perhaps if they can provide a sub lease agreement?
Re: IFRS 16 sub lease
there are examples 20 and 21 to IFRS 16, but they are quite general,
did you look at BIG 4 publications?
did you look at BIG 4 publications?
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- Posts: 22
- Joined: 08 Jan 2020, 13:49
Re: IFRS 16 sub lease
Will have a look on the big 4 communications thanks
Re: IFRS 16 sub lease
Post back if you find something interesting
Re: IFRS 16 sub lease
Without a contract, what is the basis of payment between Company Y and Company X?
Re: IFRS 16 sub lease
e-mails
Re: IFRS 16 sub lease
This is a situation common with intergroup companies with one company having the agreement with external party and the other group companies using the asset.
It is not necessary that there has to be agreement in writing. In this case there is implicit agreement between the two parties. you will have to assess if the asset for the Company Y meets the definition of a lease under IFRS 16. If there is an identified asset and Company Y has the right to control the use of the asset and obtain substantially all the economic benefits then Company X is sub-leasing the asset to Company Y.
It is not necessary that there has to be agreement in writing. In this case there is implicit agreement between the two parties. you will have to assess if the asset for the Company Y meets the definition of a lease under IFRS 16. If there is an identified asset and Company Y has the right to control the use of the asset and obtain substantially all the economic benefits then Company X is sub-leasing the asset to Company Y.
Re: IFRS 16 sub lease
well there still must be a contract, that is 'An agreement between two or more parties that creates enforceable rights and obligations.'
It doesn't have to be in writing, it depends on local law, but implicit agreement does not create *enforceable* rights and obligations, does it?
It doesn't have to be in writing, it depends on local law, but implicit agreement does not create *enforceable* rights and obligations, does it?