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Hi Sir,
For a sale and leaseback that constitutes a ‘sale’, for the buyer-lessor, when asked to ‘apply lessor accounting’, do we use the accounting treatment for a finance lease or an operating lease?
Thanks.
Post this to “Ask ACCA Tutor forum”.
By the way i think there is no longer classification of finance / operating under IFRS16.
Oh I thought the classification still exists for lessor accounting? I know they took it out completely for the lessee side. Correct me if I’m wrong?
Sorry did not read it in details.
yes you are correct that the classification still exists for lessors. The accounting treatments are mostly remained unchanged except for disclosure requirements if it is an operating lease.
For lessor (normal lease / buyer side in sales and leaseback), you will still need to determine whether the lease-back meets the conditions of a finance lease (same as the old IAS17 if you studied before). If it does not, you use operating lease accounting.
The above is just based my understanding on IFRS16.
What are the differences in disclosure requirements if it is an operating lease?
Not suggesting you to go into detail about it.
For lessor under IFRS16, more info is required to be disclosed about the lessor’ leasing activities and its risk exposure particularly to residual value risk.
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