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Hello sir,
The question relates to the sale and lease back. I am unable to understand nor is it written anywhere as to whether the asset has been leased completely or a part of it has been leased. However, in answer to this question, they have separated the Right to use asset for that portion only and treated it as part disposal.Please assist.
Thank you
I think perhaps you are not familiar with the accounting treatment under IFRS 16 Leases. I suggest you refer to Chapter 12 of our FR notes/lecture for details https://opentuition.com/acca/fr
In summary:
If the “sale” cannot be recognised as a sale in accordance with IFRS 15, the “proceeds” constitute a loan (IFRS 9 applies). The asset cannot be derecognised and the there is no “lease accounting”.If there is a sale (i.e. in accordance with IFRS 15):
– the physical asset must be derecognised (obviously); and
– a right-of-use asset is recognised for the “leaseback” calculated as a proportion of the carrying amount of the physical asset.I don’t have BPP’s version of this question but I think the scenario must indicate that the transfer meets the IFRS 15 requirements to be recognised as a sale.
No, I am very well comprehended with the IFRS 15 standard. Yes, the question states that the transfer meets the requirement of IFRS 15, and hence shall be recognised as a sale. However, the question has not indicated the part disposal or perhaps I have failed to recognise that indicator.
For your reference, the question states that.“In Dec 20X4, a leisure centre complex was sold for proceeds equivalent to its fair value of $35m, the related assets have been derecognised from the group SOFP, and a profit on disposal of $8m is included in the group SOPL for the year. The sale qualifies in line with IFRS 15.
At the date of disposal, the FV of the complex was $33m. According to the group’s website, it continues to operate services from this leisure centre and a lease liability of $22m has been created on the 20X5 draft financial statements concerning the complex.”There is no “part disposal” – there is an disposal in entirety of the leisure complex and the recognition of the leaseback as a right-of-use.
I have found a related post you may find useful https://opentuition.com/topic/ifrs-16-june-2015
There must be an error in the “part disposal” part of the answer to this question.
Clear, Thank you!
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