IFRS16 lease -Finance cost grouping

[Krishna]

An entity has obtained a building on lease. This building will be used for performing certain R&D activities.

Para 49 of IFRS 16 states, Interest on Lease liability shall be accounted under finance cost.
However since the entity is using the building for R&D activities, is it appropriate to classify the interest expense on this lease building used for R&D from finance cost to R&D expense in IFRS financial statements.

[JRSB]

If you isolate R&D costs as a separate P&L line perhaps you're better to put the RoU asset depreciation there?

[Krishna]

Prior to transition to IFRS 16, rent payments are accounted under R&D for IFRS reporting and there was no Depreciation.

Upon transition, Depreciation of ROU is classified under R&D Category as the functional presentation is followed for IFRS similar to depreciation on any other PPE/ Intangible. However, w.r.t. Interest , the same is shown under Finance cost. Is this approach acceptable ?

[Krishna]

Can i request expert views on below please ?

[JRSB]

If you're asking whether it's acceptable to show the interest within finance costs, yes, I think you've identified the para which requires that.

[Marek Muc]

In my view, classifying interest expense on lease liabilities as R&D (operating costs) in P/L statement isn't appropriate. These expenses are more about financing the asset, rather than its actual use. IFRS 16.49 is the correct IFRS reference.