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In December 20×4 , a leisure 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 statement of profit or loss for the year. The sale qualifies as a sale in line with IFRS15.
At the date of the sale the FV of the complex was $33m. The PV of the new lease liability is $22m.
Question:
BPP answers states that this is a part disposal as part of the right of use asset is retained. What in the above statement implies that the IFRS16 would effectively see this as a part – disposal and part of it has been retained?These statements are adaptations from the original Q:
“The sale qualifies as a sale in line with IFRS15.” and “At the date of the sale the FV of the complex was $33m. The PV of the new lease liability is $22m.”
The original question went on to say “The Group is leasing back the leisure centre complex ….” (and I think an exam Q would still make that clear rather than implying it through the mention of a lease liability).“Part disposal” is not really the term to describe the treatment of a sale and leaseback in accordance with IFRS 16. Under IFRS 16, the physical asset is derecognised and a right-of-use asset recognised instead.
Oh okay, thanks.
1. What in the question tells you that we need to calculate the proportion of asset retained for use?
2. Is it because the question states that IT IS a sale under IFRS 15 but also a sale and leaseback arrangement? If so will questions always state if it is a sale or not?
3. The answer uses the FV at at the date of the sale – $33m to calculate part of the asset retained for use -I thought it would be the FV of the proceeds $35m as this is what was received ?
1. As I said – there isn’t retention of a portion.
2. Yes I believe the Q will always be clear whether there is a sale under IFRS 15 as this fundamental.
3. No asset can be carried at more than fair value – this is a fundamental measurement principle. The excess $2m must be an additional loan – it cannot be used to inflate the cost of the right-of-use asset acquired.See section 5 of Chapter 19 in the SBR notes for further details.
There is also a technical article here https://www.accaglobal.com/gb/en/student/exam-support-resources/fundamentals-exams-study-resources/f7/technical-articles/ifrs16.htmlIf by “how much” you mean a monetary measure of the right to use the asset then yes – the statement of financial position will show a measure ($) of the right-of-use.
If you mean some measure of a right to keep the asset then no – the right to keep the asset (i.e. ownership) has been given up in the sale of the asset. That’s why it must be completely derecognised and a new asset recognised.
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