Lessee stays behind, lessor moves out of group - IFRS 16

[RTW]

Hi all,

I am a bit struggling with the following example under IFRS:

Background:
Two sister companies are relevant to this situation: OpCo A (lessee) and InProp B (lessor) who are both owned by Holding C.
Inprop B has investment property which it leases to its sister company OpCo A.
For the consolidated financial statements of Holding C this is presented as property, plant and equipment as it relates to buildings for own use.
The lease as a lessor and lessee under IFRS 16 is therefore eliminated in the consolidated financial statements.
Holding C sells InProp B to another company, but InProp B continues with the same lease to OpCo A.
As such, now in the consolidated financial statements of Holding C it has to present the relevant Right-of-use Asset and Lease Liability of the lease.
In 2019 upon the initial implementation the company used the modified retrospective approach.
Let's say from the perspective of OpCo A as a lessee the Right-of-use Asset is 105 and Lease Liability is 110.

Question:
Does the sale of InProp B trigger an additional equity effect of -5 for OpCo A/Holding C as it now has to present its relevant Right-of-use Asset of 105 and Lease Liability of 110?

[Leo]

Hi,
do you mean that the delta is recognised in Equity in the consolidated accounts of Holding C?

[RTW]

Yes, correct that’s my question.

[Leo]

I think an impact in equity would make sense. But I'm not sure whether you should take it to the pl on disposal or not.