Grant Thornton International Ltd has updated Insights into IFRS 16 – Sale and leaseback accounting.
Overview
The Insights into IFRS 16 series summarizes key areas of IFRS 16 Leases and aims to demystify those key requirements that are challenging in practice. Since its first release, the Standard has gone through a number of amendments as well as IFRS Interpretation Committee decisions relating to IFRS 16. Grant Thornton International Ltd is therefore going through a process of reviewing and updating its publications to ensure that they all reflect up-to-date information and guidance, focusing on areas where there have been changes.
The updated document Insights into IFRS 16 – Sale and leaseback accounting provides guidance on the accounting for sale and leaseback transactions.
The issue
IFRS 16 makes significant changes to accounting for sale and leaseback transactions.
A sale and leaseback transaction is a popular way for entities to secure long-term financing from substantial property, plant and equipment assets such as land and buildings. It is a transaction where an entity (the seller-lessee) transfers an asset to another entity (the buyer-lessor) for consideration and leases that asset back from the buyer-lessor.
IAS 17 Leases covered the accounting for a sale and leaseback transaction in detail but only from the perspective of the seller-lessee. As IFRS 16 has withdrawn the concepts of operating leases and finance leases from lessee accounting, the accounting requirements that the seller-lessee must apply to a sale and leaseback transaction are more straightforward. In addition, IFRS 16 provides an overview of the accounting requirements for buyer-lessors too.
The updated document explains the new concepts and provides examples of the requirements.
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