DOCSLIB.ORG

Applying IFRS for the Real Estate Industry

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Applying IFRS for the Real Estate Industry www.pwc.co.uk Applying IFRS for the real estate industry November 2017 Applying IFRS for the real estate industry Contents Introduction to applying IFRS for the real estate industry 1 1. Real estate value chain 2 1.1. Overview of the investment property industry 2 1.2. Real estate life cycle 2 1.3. Relevant accounting standards 3 2. Acquisition and construction of real estate 5 2.1. Overview 5 2.2. Definition and classification 5 2.3. Acquisition of investment properties: asset acquisition or business combination 9 2.4. Asset acquisitions: Measurement at initial recognition 15 2.5. Accounting for forward contracts and options to acquire real estate 18 2.6. Special considerations: investment properties under construction 20 2.7. Accounting for rental guarantees 21 2.8. Development properties: accounting for the costs of construction 23 3. Subsequent measurement of investment property 27 3.1. Costs incurred after initial recognition 27 3.2. Replacement of parts of investment property and subsequent expenditure 28 3.3. Subsequent measurement: Cost model 29 3.4. Impairment 32 3.5. Subsequent measurement: Fair value model 36 3.6. Fair value measurement of investment property: IFRS 13 38 3.7. Change in use of assets: transfers into and out of investment property 45 4. Rental income: accounting by lessors 49 4.1. Overview of guidance 49 4.2. Definition of a lease 49 4.3. Rental income: Lessor accounting 50 4.4. Premiums for properties in a prime location 56 4.5. Surrender premiums 56 4.6. Assumption of potential tenant’s existing lease 57 4.7. Key money 58 4.8. Letting fees 58 4.9. Tenant deposits received 59 4.10. Revenue from managing real estate property 60 4.11. Lease modifications 64 4.12. Revenue recognition: Surrender premium/break costs 65 4.13. Tenant obligations to restore a property’s condition 65 5. Real estate structures and tax considerations 66 PwC Contents Applying IFRS for the real estate industry 5.1. Consolidation 66 5.2. Joint arrangements 72 5.3. Taxation 76 6. Disposal of investment property 83 6.1. Classification as held for sale under IFRS 5 83 6.2. Sale of investment property 83 7. Other reporting issues 86 7.1. Functional and presentation currency 86 7.2. Cash flow statement 88 8. Disclosures 91 8.1. Segment disclosures 91 8.2. IFRS 13 disclosures 96 8.3. Disclosure of fair value for properties accounted for using the cost model 97 PwC Contents Applying IFRS for the real estate industry Introduction to applying IFRS for the real estate industry What is the focus of this publication? This publication considers the main accounting issues encountered by real estate entities and the practices adopted in the industry under International Financial Reporting Standards (IFRS). Who should use this publication? This publication is intended for real estate entities that construct and manage real estate property. Activities such as the construction of properties on behalf of third parties, and holding or developing properties principally for sale or otherwise own use, are not considered in this publication. This publication is intended for: audit committees, executives and financial managers in the real estate industry; investors and other users of real estate industry financial statements, so they can identify some of the accounting practices adopted to reflect features unique to the industry; and accounting bodies, standard-setting agencies and governments throughout the world that are interested in accounting and reporting practices and responsible for establishing financial reporting requirements. What is included? This publication covers issues that we believe are of financial reporting interest due to their particular relevance to real estate entities and/or historical varying international practice. This publication has a number of sections designed to cover the main issues raised. This publication is based on the experience gained from the worldwide leadership position of PwC in the provision of services to the real estate industry. This leadership enables PwC’s Real Estate Industry Group to make recommendations and lead discussions on international standards and practice. We hope you find this publication helpful. PwC 1 Applying IFRS for the real estate industry 1. Real estate value chain 1.1. Overview of the investment property industry The investment property or real estate industry comprises entities that hold real estate (land and buildings) to earn rentals and/or for capital appreciation. Real estate properties are usually held through a variety of structures that include listed and privately held corporations, investment funds, partnerships and trusts. 1.2. Real estate life cycle The life cycle of real estate that is accounted for as investment property typically includes the following stages: Acquisition and Leasing or Sale or Management construction of subleasing of demolition of of real estate 4 1 real estate 2 real estate 3 real estate Step 1: Acquisition and construction of real estate Control of real estate can be obtained through: direct acquisition of real estate; construction of real estate; or leasing of real estate, under either operating or finance leases. Entities normally perform strategic planning before the acquisition, construction or leasing, to assess the feasibility of the project. Entities might incur costs attributable to the acquisition, construction or leasing of real estate, during this first step of the cycle. Entities might also enter into financing arrangements to secure the liquidity required for the acquisition and construction of real estate. Step 2: Leasing or subleasing of real estate Most real estate entities primarily hold real estate for own use or for the purpose of earning rentals. For entities holding real estate for the purpose of earning rentals, lease agreements might contain a variety of terms. The most common terms that will feature in all leases include matters such as the agreed lease term (and any options to extend that term), as well as the agreed rental payments due. Additional items that might feature include payments for maintenance services, insurance, property taxes and terms of lease incentives provided to the tenant. Step 3: Management of real estate Real estate entities often provide management services to tenants who occupy the real estate that they hold, to ensure that the property is in good condition and to preserve the value of the real estate. These services might be performed by the real estate owners themselves, or they might be outsourced to other entities that are designed to provide these services. Services might include maintenance of common areas, cleaning and security. Step 4: Sale or demolition of real estate Real estate entities might sell the real estate that they hold at the end of the life cycle to benefit from capital appreciation. Alternatively, entities might proceed with demolition of the property, potentially with a view to construction of a new property. PwC 2 Applying IFRS for the real estate industry 1.3. Relevant accounting standards Acquisition and construction of real estate that is accounted for as investment property is governed by the requirements of IAS 40, ‘Investment property’, IAS 16, ‘Property, plant and equipment’, and IAS 23, ‘Borrowing costs’. The requirements of IAS 17, ‘Leases’, apply when an entity leases out the real estate property or an entity does not elect to classify its property interest under an operating lease as investment property. The requirements of IAS 18, ‘Revenue’, apply for revenue generated by a real estate entity other than lease income. This publication is based on accounting standards that are effective for periods beginning on or after 1 January 2017. There are a number of new standards, interpretations or amendments to existing standards issued as of the date of this publication that are not yet effective. Their impact is presented in separate sections under each relevant area or otherwise referred to specifically in the guide. The standards, interpretations or amendments are as follows: IFRS 9, ‘Financial Instruments’, which replaces guidance of IAS 39 on classification and measurement of financial instruments (‘IFRS 9’); IFRS 15, ‘Revenue from contracts with customers’, which replaces the guidance in IAS 18, IAS 11, IFRIC 13, IFRIC 15, IFRIC 18 and SIC 31 (‘IFRS 15’); IFRS 16, ‘Leases’, which replaces IAS 17, IFRIC 4, SIC 15 and SIC 27 (‘IFRS 16’); ‘Transfers of investment property’ amendments to IAS 40, ‘Investment Property’; IFRIC 22, ‘Foreign currency transactions and advance consideration’ (‘IFRIC 22’); and IFRIC 23, ‘Uncertainty over income tax treatments’ (‘IFRIC 23’). The following standards, effective as at the date of this publication, are referred to in the guide: IFRS 3, ‘Business combinations’ (‘IFRS 3’); IFRS 5, ‘Non-current assets held for sale and discontinued operations’ (‘IFRS 5’); IFRS 7, ‘Financial instruments: disclosures’ (‘IFRS 7’); IFRS 8, ‘Operating segments’ (‘IFRS 8’); IFRS 10, ‘Consolidated financial statements’ (‘IFRS 10’); IFRS 11, ‘Joint arrangements’ (‘IFRS 11’); IFRS 13, ‘Fair value measurement’ (‘IFRS 13’); IAS 1, ‘Presentation of financial statements’ (‘IAS 1’); IAS 2, ‘Inventories’ (‘IAS 2’); IAS 7, ‘Statement of cash flows’ (‘IAS 7’); IAS 8, ‘Accounting policies, changes in accounting estimates and errors’ (‘IAS 8’); IAS 11, ‘Construction contracts’ (‘IAS 11’); IAS 12, ‘Income taxes’ (‘IAS 12’); IAS 16, ‘Property, plant and equipment’ (‘IAS 16’); IAS 17, ‘Leases’ (‘IAS 17’); IAS 18, ‘Revenue’ (‘IAS 18’);
Load more

Recommended publications
  • Risk & Reward in Aircraft Backed Finance
    Modeling Aircraft Loan & Lease Portfolios 3rd revision Discussion Notes October 2017 Modeling Aircraft Loans & Leases Discussion notes December 2013 2 PK AirFinance is a sub-business of GE Capital Aviation Services (GECAS). The company provides and arranges debt to airlines and investors secured by commercial aircraft. Cover picture by Serge Michels, Luxembourg. 3 Preface These discussion notes are a further update to notes that I prepared in 2010 and revised in 2013. The issues discussed here are ones that we have pondered over the last 25 years, trying to model aircraft loans and leases quantitatively. In 1993, Jan Melgaard (then at PK) and I worked with Bo Persson in Sweden to develop an analytic model of aircraft loans that we called SAFE. This model evolved into a Monte Carlo simulation tool, Lending EDGE, that was taken into operation at PK in 2012 and validated under ISRS 4400 by Deloitte in 2013. I have now made some corrections and amendments to the previous version, based on helpful feed-back from industry practitioners and academics. I have added a section on Prepayment Risk in loans and expanded on Jurisdiction Risk. My work at PK AirFinance has taught me a lot about risks and rewards in aircraft finance, not least from the deep experience and insight of many valued customers and my co-workers here at PK and at GECAS, our parent company, but the views and opinions expressed herein are my own, and do not necessarily represent those of the General Electric Company or its subsidiaries. In preparing these notes, I have been helped by several people with whom I have had many inspiring discussions.
    [Show full text]
  • IFRS 16 Workshop Deck
    Alumni Seminar - Capital Market Updates and Preparing for HKFRS 16 23 November 2018 Disclaimer This presentation contains general information only and Deloitte Touche Tohmatsu is not, by means of this presentation, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte Touche Tohmatsu, its affiliates and related entities shall not be responsible for any loss sustained by any person who relies on this presentation. © 2018©. F2018or info.r mFoarti oinfn, ocromntactti oDne,lo cittoent Cachinta. Deloitte China. 2 Speakers Edward Au Kenneth Chan Co-Leader Partner National Public Offering Group Audit & Assurance Deloitte China Partner Audit & Assurance [email protected] Deloitte China +852 2852 5622 [email protected] +852 2852 1266 © 2018. For information, contact Deloitte China. 3 IPO Market Update © 2018. For information, contact Deloitte China. 4 The Rules Changes © 2018. For information, contact Deloitte China. 5 Updated listing requirements for MB and GEM Effective 15 February 2018 1.Profit Test § Profits in the last 3 financial years > HK$50 million § Preceding 2 years' aggregate profits > HK$30 million § Most recent year's net profit > HK$20 million § Market capitalization at the time of listing > HK$500million 2. Market Capitalization/ Revenue/ Cash Flow Test § Market capitalization at the time of listing > HK$2 billion § Most recent audited financial year's revenue > HK$500 million § Preceding 3 financial years’ aggregated positive cash flow from operating activities > Main Board HK$100 million 3.
    [Show full text]
  • Southwest Airlines Co
    Southwest Airlines Co. May 2020 – Investor Booklet Cautionary Statement Regarding Forward-Looking Statements This booklet contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Specific forward-looking statements include, without limitation, statements related to (i) the Company’s Vision; (ii) the Company’s financial position, outlook, expectations, strategies, and projected results of operations, including factors and assumptions underlying the Company’s projections, in particular the impacts of the COVID-19 pandemic; (iii) the Company’s network and capacity plans, expectations, and opportunities, including factors and assumptions underlying the Company's plans and expectations, in particular the impacts of the COVID-19 pandemic; (iv) the Company’s expectations with respect to liquidity (including its plans for the repayment of debt and finance lease obligations) and anticipated capital expenditures; (v) the Company's plans and expectations regarding its fleet, its fleet order book, and its fleet delivery schedule, including factors and assumptions underlying the Company's plans and expectations; (vi) the Company’s expectations about future disbursements pursuant to the Payroll Support Program under the CARES Act; (vii) the Company's expectations with respect to the secured loan program under the CARES Act; and (viii) the Company’s initiatives and related plans and expectations, and related operational and financial expectations, including with respect to its reservation system, Southwest Business, global distribution systems, and related alliances and capabilities. These forward- looking statements are based on the Company’s current intent, expectations, and projections and are not guarantees of future performance.
    [Show full text]
  • Leases a Guide to IFRS 16
    Leases A guide to IFRS 16 June 2016 This guide contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by means of this guide, rendering professional advice or services. Before making any decision or taking any action that might affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this guide. © 2016. For information, contact Deloitte Touche Tohmatsu Limited. Extracts from International Financial Reporting Standards and other International Accounting Standards Board material are reproduced with the permission of the IFRS Foundation. Leases | A guide to IFRS 16 Foreword This guide is intended to assist preparers and users of financial statements to understand the impact of IFRS 16 Leases, issued in January 2016 and effective for accounting periods beginning on or after 1 January 2019. We begin with a high-level executive summary of the new requirements, followed by a specific focus on the important issues and choices available for entities on transition to the new Standard. Our detailed guide covers the requirements of the new Standard, supplemented by interpretations and examples to give clarity to those requirements, and pointers regarding practical issues that are likely to arise. In the appendices, we provide: • a summary of the important illustrative examples accompanying IFRS 16 dealing with the identification of leases; • convenient checklists for IFRS 16’s presentation and disclosure requirements (separately for lessees and lessors); and • a brief comparison with US Generally Accepted Accounting Principles (US GAAP).
    [Show full text]
  • Leaseplan Announces Q1 2021 Results
    LeasePlan announces Q1 2021 results AMSTERDAM, the Netherlands, 12 May 2021 – LeasePlan Corporation N.V. (“LeasePlan”; the “Company”), one of the world’s leading Car- as-a-Service (“CaaS”) companies and a leading pan-European used-car market place, today reports its Q1 results. Q1 2021 financial highlights • Net result of EUR 181 million (+810%) • Underlying net result of EUR 166 million (+44.8%) • Car-as-a-Service: • Underlying Lease and Additional Services gross profit of EUR 366 million (+1.0%) driven by strong Damage Services & Insurance results and lower costs for expected credit losses • PLDV and End of Contract Fees Gross Profit of EUR 61 million (+536%) primarily driven by favourable used-car pricing • Operating expenses of EUR 205 million (+5.8%) which includes continued investments in our digital platforms • Underlying net result of EUR 190 million (+37.9%) • CarNext: • Revenues stable at EUR 169 million (-1.5%) with lower B2C retail sales (-18.4%) due to COVID-19-related temporary store closures, offset by increased third-party and ancillary services sales • Underlying net result of EUR –24 million (-4.0%) including continued investments in key markets focussed on accelerating future growth • Announcement of Sale and Purchase Agreement through which LeasePlan will divest 100% of its shares in LeasePlan Australia and New Zealand to SG Fleet. LeasePlan will hold a 13.0% stake in SG Fleet post-closing of the transaction • Quarter-end liquidity buffer of EUR 7.6 billion Key numbers123 Q1 2021 Q1 2020 % YoY Growth VOLUME Serviced fleet (thousands), as at 31 March3 1,861.8 1,858.7 0.2% Numbers of vehicles sold (thousands) 77.3 74.8 3.4% PROFITABILITY Underlying net result (EUR Million) 166.1 114.7 44.8% - Car-as-a-Service 190.2 137.9 37.9% - CarNext −24.1 −23.2 −4.0% Net result (EUR Million) 180.6 19.8 810.4% Underlying return on equity2 11.5% 13.8% 1 Due to rounding, numbers throughout this release might not add up precisely to the totals provided.
    [Show full text]
  • Banking & Capital Markets Industry Supplement for IFRS 16 'Leases'
    The leases standard A summary of the new model and its potential impact Banking & Capital Markets industry supplement What’s inside: Overview .......................... 1 Impact ...................................... 1 At a glance Effective date and transition . 2 The IASB has issued a new standard on leasing under which lessees will be required to Identifying leases ........... 3 bring substantially all leases onto their balance sheets. Some changes could also impact Identified asset........................ 3 certain lessors. The new guidance will likely introduce some level of change for all Right to control the use of the entities that are party to a lease. identified asset ........................ 4 Intercompany arrangements 4 In depth INT2016-01 provides a summarized analysis of the new standard. In addition, Components, contract PwC’s Manual of Accounting, Chapter 15 Leases, contains a comprehensive overview of consideration, and the new leases standard and its related implications. allocation ........................ 5 Lessee accounting This supplement highlights some of the areas that could create the most significant model ............................... 6 challenges for entities in the Banking & Capital Markets sector as they transition to the new standard. Initial direct costs ........... 9 Accounting for initial direct costs in a failed sale and leaseback transaction ............................ 10 Overview Lessor accounting model ..............................10 Leases are common in the Banking & Capital Markets sector. Entities are generally lessees (for example, of banking branches and IT equipment, and intercompany leases between operating companies and trading companies) and, at times, lessors of assets (for example, of aircraft and properties). Impact Lessees IFRS 16 requires lessees to capitalise (i.e., recognise a right-of-use asset and a lease liability) virtually all leases; the only optional exemptions are for certain short-term leases and leases of low-value assets.
    [Show full text]
  • IFRS 16 – Adoption and Accounting Principles
    IFRS 16 – adoption and accounting principles Date of application and transition method The company starts applying the standard on January 1, 2019. The company will apply the modified retrospective approach in transition and thus, the comparative figures will not be restated. The table below presents relevant accounting policy decisions that YIT has initially made. Relevant accounting policies Short description of the policy to be applied Transition method The company will apply the modified retrospective approach in transition. The lease liabilities are recognised based on the remaining lease payments discounted using incremental borrowing rates at the date of initial application. Measurement of the right-of-use assets in transition The company will measure the right-of-use assets at an amount equal to the lease liability (adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the statement of financial position immediately before the date of initial application). Measurement and recognition exemption for leases The company will not recognise leases, for which for which the underlying asset is of low value the underlying asset is of low value, in the balance sheet. Measurement and recognition exemption for leases The company will not recognise short-term leases for which the underlying asset is of low value in the balance sheet. Short -term leases are lease contracts that have a lease term of 12 months or less. Description of practical expedients used in transition • The company shall not reassess existing lease contracts but shall apply the guidance regarding the definition of a lease only to contracts entered into (or changed) on or after the date of initial application.
    [Show full text]
  • Lease Financing, Comptroller's Handbook
    Comptroller’s Handbook A-LF Safety and Soundness Capital Asset Sensitivity to Other Adequacy Quality Management Earnings Liquidity Market Risk Activities (C) (A) (M) (E) (L) (S) (O) Lease Financing August 2014 RESCINDED This document and any attachments are Updated June 3, 2016, for Credit Underwriting Assessment System replaced by version 1.2 of the booklet of the same title published January 2017 Updated January 27, 2017, for Nonaccrual Status Office of the Comptroller of the Currency Washington, DC 20219 Contents Introduction .................................................................................................................................................. 1 Overview ........................................................................................................................................... 1 Background .............................................................................................................................. 1 Statutory and Regulatory Framework for Leasing ................................................................... 2 Accounting Categorization of Leases by Lessors .................................................................... 8 Accounting for Leases by Lessors ......................................................................................... 10 Renewals, Extensions, and Treatments for Off-Lease Property ............................................ 11 Other Lease Financing Products and Alternatives ................................................................. 12 Risks
    [Show full text]
  • IFRS 16 - Leases: Tax Implications of This New Leasing Standard
    Tax Alert IFRS 16 - Leases: Tax implications of this new leasing standard In brief Lessee IFRS 16 on leases became effective 1 January April 2019 The new standard requires lessees to recognise 2019. Based on this new standard, accounting leases on their balance sheet except for low disclosures for operating leases have been value assets and short term leases. Get in touch impacted. IFRS 16 brings about significant changes to both the Income Statement The lessee is required to initially recognise a Francis Kamulegeya and the Balance Sheet of the lessee. The right of use asset (Dr) and a corresponding Country Senior Partner liability (Cr) at the present value of future lease +256(0)312 354 400 corresponding tax implications for operating [email protected] leases under the Income Tax Act, Cap 340 payments in the balance sheet. Any lease should be re-examined. The tax implications for payments made reduce the lease liability as well Plaxeda Namirimu lessors are substantially unchanged. as the right of use asset. Associate Director A depreciation expense of the right of use asset +256(0)312 354 400 Section 59 of the Income Tax Act (“ITA”) [email protected] provides for the tax treatment of finance and an interest charge on the outstanding lease leases. For a lease to qualify as a finance lease liability is recognised in the income statement. Trevor Lukanga Bwanika under this section, consideration is given to its The above single accounting model no longer Senior Manager effective life, the option to purchase the property +256(0)312 354 400 distinguishes between finance and operating and the estimated residual life of the property.
    [Show full text]
  • THE NEW LEASE ACCOUNTING STANDARD Agenda
    2019 Annual Credit Union Seminar ACCOUNTING UPDATE Presented By: JAMES W. PRUZINSKY, CPA Partner | Audit Services Group Today’s Topics • CECL • Leasing • Revenue Recognition • Financial Instruments • Cloud Computing Arrangement (CCA) Accounting CECL (CURRENT EXPECTED CREDIT LOSS) CECL Effective date: January 1, 2023 – for calendar year-ends, just extended! Transition: Adjustment to the allowance will be made to undivided earnings on January 1, 2023, per above Early adoption is permitted ALLOWANCE FOR LOAN LOSSES – CURRENT GAAP Allowance for Loan Losses (ALL) What the ALL represents: • The ALL is an accounting estimate of credit losses inherent in an institution's loan portfolio that have been incurred as of the statement of financial condition date. • A loan is impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. • This is the “incurred loss” threshold model. Allowance for Loan Losses (ALL) The allowance for loan losses is composed of the following: • Individual loan impairment/reserve valuations (GAAP guidance Accounting Standards Codification (ASC) 310-10-35, previously FAS 114). TDR’s are incurred in this component. • General reserve calculations for homogeneous loan pools including (GAAP guidance ASC 450-20, previously FAS 5): • Historical loss rate calculations; and • Qualitative factor adjustments. Allowance for Loan Losses (ALL) Key qualitative factors that financial institutions should consider when analyzing the ALL relative to adjustment of historical loss rates: • Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off and recovery practices not considered elsewhere in estimating credit losses.
    [Show full text]
  • IFRS 16 – an Overview
    IFRS 16 – An overview The new normal for lease accounting March 2021 home.kpmg/ifrs Contents 1 IFRS 16 at a glance 2 7 Lease modifications 68 1.1 Key facts 2 7.1 Definition 68 1.2 Key application issues 3 7.2 Lessee modification accounting 70 7.3 Lessor modification accounting 75 2 Lessee accounting 4 2.1 Lessee accounting model 4 8 Sub-leases 80 2.2 Initial measurement of the lease liability 5 9 Sale-and-leaseback 82 2.3 Initial measurement of the right-of-use asset 11 2.4 Subsequent measurement of the lease liability 12 Appendix I: List of examples 86 2.5 Subsequent measurement of the right-of-use Keeping in touch 88 asset 15 2.6 Recognition exemptions for lessees 17 About this publication 90 2.7 Presentation and disclosure 20 Acknowledgements 90 3 Lessor accounting 23 3.1 Lessor accounting model 23 3.2 Lease classification 24 3.3 Operating lease model 27 3.4 Finance lease model 28 3.5 Presentation and disclosure 29 4 Lease definition 31 4.1 Overview 31 4.2 Identified asset 32 4.3 Economic benefits from using the asset 38 4.4 Right to direct the use 40 5 Separating components 46 5.1 Overview 46 5.2 Identify separate lease components 46 5.3 Identify separate non-lease components 48 5.4 Allocate the consideration 50 5.5 Allocate the variable consideration 53 6 Lease term 56 6.1 Overview 56 6.2 The non-cancellable period 57 6.3 The enforceable period 57 6.4 The reasonably certain threshold 60 6.5 Renewable and cancellable leases 62 6.6 Changes in the lease term 64 The new normal for lease accounting IFRS 16 Leases has now been successfully adopted by companies reporting under IFRS® Standards.
    [Show full text]
  • Accounting for Leases and Hire Purchase Contracts
    SSAP-18 Issued 07/85 Revised 06/90 New Zealand Society of Accountants STATEMENT OF STANDARD ACCOUNTING PRACTICE NO. 18 Revised 1990 ACCOUNTING FOR LEASES AND HIRE PURCHASE CONTRACTS Issued by the Council, New Zealand Society of Accountants CONTENTS paragraph Introduction ............................................................................................ 1.1 Application ............................................................................................. 2.1 Definitions .............................................................................................. 3.1 Discussion Classification of Leases ................................................................... 4.1 The Accounting Treatment of Leases in the Financial Statements of Lessees .................................................................................. 4.5 The Accounting Treatment of Leases in the Financial Statements of Lessors................................................................................... 4.14 Land and Buildings .......................................................................... 4.28 Sale and Leaseback .......................................................................... 4.30 Disclosure ........................................................................................ 4.35 Standard Accounting Practice Accounting for Leases in the Financial Statements of Lessees ........ 5.1 Accounting for Leases in the Financial Statements of Lessors ........ 5.5 Accounting for Sale and Leaseback Transactions ...........................
    [Show full text]