A company has ten years left to run on the lease of a property that is currently unoccupied.The present value of the future rentals at the reporting date is $50,000.Subletting possibilities are limited but the directors feel that likely future subletting rentals could have a present value of $10,000
What is the accounting treatment?
ACCA Forums
SBRP2 (IAS-37),provision,contingent liability,contingent asset
i think this question is more to do with leases rather than provisions. As i cannot see in this question that there is a legal or constructive obligation arising from past events.
As I see it there are two issues here. 1. IAS17: An unavoidable lease Obligation of $50000 that has to be shown on the SOFP. 2. IAS37: The subleting part of the "equation" cannot be recognized because it is not measurable and the directors have no signed uncancellable contract as evidence that they will recieve the $10000. if they had it then this would be an asset seperate from the lease liability. In onother light a contingent asset can only be disclosed by way of notes and not recognised on the face of the financial statements. Just thinking
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