Inventory Costs including lease under IFRS 16
Posted: 04 Jul 2023, 14:36
Hi Marek and friends,
My inventory costs consists of Factory rent which is covered under IFRS 16
Therefor should I account only Dep on ROU asset as part of Inventory or both Dep on ROU asset plus interest on lease liability since in substance the rent expense has been replaced by dep on ROU plus interest on lease liability which will equalise in total at the end of the lease period.
however this means my cost (to the extent of rent earlier which was fixed) will fluctuate because of interest on lease liability which changes year on year.
For me the rent isn't a material part of the cost but i'd like to know what is the correct approach
if i only take dep on ROU my cost is undervalued
My inventory costs consists of Factory rent which is covered under IFRS 16
Therefor should I account only Dep on ROU asset as part of Inventory or both Dep on ROU asset plus interest on lease liability since in substance the rent expense has been replaced by dep on ROU plus interest on lease liability which will equalise in total at the end of the lease period.
however this means my cost (to the extent of rent earlier which was fixed) will fluctuate because of interest on lease liability which changes year on year.
For me the rent isn't a material part of the cost but i'd like to know what is the correct approach
if i only take dep on ROU my cost is undervalued