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IFRS 16: Leases - Coggle Diagram
IFRS 16: Leases
Recognition exemptions
Low-value underlying asset - expensed
short-term lease expensed
must be distinct
Total lease pmts/Lease term
Objective
prescribe acc. treatment
ensure transactions relevant & faithfully represented
help users understand effect of leases on AFS
Deferred Tax Implications
CA of RUA
TB = Amounts deductible in future by SARS
TB ALWAYS ZERO
SARS doesn't recognise RUA no amounts deductible in future
CA of lease liability
TB = CA -
amounts allowed for deduction
in future by SARS
TB will be VAT
TB= installments paid this year/Total installments * VAT input claimed on day 1
(commencement date)
Amounts allowed for deduction
= installment (excl. VAT)
Amounts
NOT allowed as deduction
= VAT
Tax Base (s23C)
Measurement
Lease liability
para 26 - PV of pmts not paid to date
PV calc.
N
Interest
PMT
(FV) - outflow of cash
PV calc.
N (lease term)
non-cancellable period
Lessee terminate >> enforceable add to NCP
Lessor terminate >> Incl. period to terminate
:heavy_plus_sign: rent free periods (Covid)
:heavy_plus_sign: Extension periods
Excl Termination
B34 - Right to terminate without permission & small penalty
Interest
implicit & explicit
PMT(Lease payments)
Fixed (unavoidable in substance) >> excl. lease incentives
Variable (expensed in P/L)
Future value:
USE
guaranteed residual value
End of lease pmts
Cancellation penalties
other amounts
Right-of- use liability
para 23 - Measure RUA at cost
:heavy_minus_sign: Lease incentives (read standard)
:heavy_plus_sign: Initial direct costs
:heavy_plus_sign: Dismantle/restore (PV of that amount)
:heavy_minus_sign: VAT
:heavy_plus_sign: PMTs made on or before Commencement date (deposit)
PV of Lease liability :heavy_plus_sign:
Subsequent measurement (p.29)
use cost model (otherwise IAS 40 & IAS 16)
IAS 40 model FV ( compulsory to use FV) :warning:
IAS 16 Revaluation model (optional to use Reval) :star:
Depreciation (USEFUL LIFE)
Transfer of ownership? (p.32)
Use useful life if ownership passes to lessee :check:
Ownership does not pass SHORTER of:
useful life & lease term
Adjusment of lease liability
Journals
On commencement date
DR RUA
DR Vat input (ICA)
CR Bank
deduct deposits and initial pmts)
CR Lease liability(incl. VAT)
PV
Subsequent measurement
Lease Liability
DR Lease Liability (Cash PMT Less Interest)
DR Interest Expense
(carrying amount of liability X discount rate)
CR Cash (Actual pmt)
Depreciation & Impaiment
Identification
para 9 - Right of use asset in exchange for consideration for period of time
Right
control
implicit vs excplicit
capacity portion
physically distinct
not distinct but can obtain ALL EB
substantive substitution rights :check: = NO lease
Control
Obtain EB
Direct use of
Limitations
Lease Components
Lease component = stand alone price
Non-lease = Aggregate price
Practical expedient = combine lease & non-lease
Recognition
Commencement date
Right of use asset
Lease liability
Lease Term
Non-cancellable period(period where we actually make payments - enforceable by contract (para 18)
para B34 - Right to terminate without permission
B35 - lessee has right to terminate =
option to terminate
B35 Lessor terminate >> period includes option to terminate lease
N =? start counting from commencement date
rent-free periods (Covid leases)
extension(will exercise)
termination(not exercise)