IFRS16 : Depreciation Leasehold Improvements

[Lasa1]

Hello,
Company ABC is moving to a new building that it will lease and so it will activate a Right of Use. The lease agreement is for 15 years. Date of move is April1st 2022.
ABC will occupy the whole building and no sharing it with any other company.
To adapt the building to ABC needs, ABC has enhanced the building space, such as flooring, electrical works, tiling, false ceilings. Those works change the inside distribution and comfort of the building and are “fixed to it”. ABC has been running those works prior to April 1st so everything was ready by the date of the move.
ABC does not own buildings in other locations and those are the asset classes defined by the company:

Asset Class Years
Building 20.00
Business goodwill 3.00
Capitalised R&D 3.00
Furnitures 8.00
Hdw/computer equipment 4.00
Licenses 5.00
Machinery 8.00
Movables and Fixtures 8.00
Office equipment 8.00
Patents 5.00
Software 4.00
Trademarks 10.00
Vehicles 5.00

I have 2 questions on how to treat the leasehold improvements:
1. Asset class: Since the company has no buildings, can I assigned the asset class “Building” to leasehold improvements, or should I use something else? Wondering if it is ok to show a balance under “Building" asset class in the annual financial report while not owning any building. Is this a possibility in IFRS to have an asset class named “Leasehold improvements” or this is not a current practice?

2. Useful life: If the leasehold improvement is expected to have a useful life less than the remaining term of the lease agreement, I should depreciate the asset over the remaining useful life. However, for those leasehold improvements that are expected to have a useful life equal or greater than the term of the lease, I think I should depreciate the asset over the term of the lease. Is this correct? Any IFRS16 par. that I can refer to?

Thanks
Regards

[Leo]

Hi,

An entity applies IAS16 to determine the useful life of non-removable leasehold improvements. If the lease term is shorter than the economic life of the improvement, the entity considers whether it expects to use the leasehold improvements beyond that lease term. If the Entity does not expect to do so, then applying IAS16 and concludes that the useful life f the non removable leasehold improvements is the same as the lease term.

ey-devel-157-lease-terms-december-2019.pdf (page 3)

[Marek Muc]

Re.1

Leasehold improvements are substantially different from buildings IMO

Re.2

https://www.ifrs.org/content/dam/ifrs/s ... ements.pdf