IFRS 16 - Intercompany lease

[ddtozato]

Hi there

So, company A (parent company) has a building which is leased to company B (subsidiary).
This agreement complies w/ the requirements to recognize an agreement under IFRS 16.

My question is not related to the P&L but to the asset: when I consolidate company A's figures, don't I have a duplicated asset because the asset lies under PPE and ROU? What should I do?

In company A, should I derecognize the PPE, replacing by an AR?

Thanks

[DJP]

In the consolidated accounts you only have the building (PPE). All intra-group transactions are eliminated in the consolidation process.

[kevin.aycardo]

I concur with the above i.e. the lease transaction will be eliminated at the consolidated FS being an intercompany transaction. Your question might be more of how to consolidate the lease - please also check how the lease transaction is accounted for at Company A (i.e. you basically have to eliminate all those interco transactions so that you will only have the building after consolidation).

[Ketan Marwah]

Hi,

Just be a tad bit careful with the elimination journal especially if it is an operating lease between the two entities. For reference:

https://assets.kpmg.com/content/dam/kpm ... epager.pdf