IFRS 16
IFRS 16
Presentation of the Standard
IFRS 16 requires that the lessee recognize all lease agreements on the balance sheet, given that at the outset, these are:
a debt in respect of rent
a right of use on the leased asset, recognized as an asset under the fixed assets heading; Accordingly, for lessees, the distinction between operating leases and finance leases vanishes. Regardless of the chara...
Purpose and Scope
Purpose and Scope
Purpose
The purpose of this document is to enable Lease users to better understand Lease terminologies and their functions in calculating the impacts of the standard, through practical cases illustrating the behaviour of certain types of contracts in Lease.
Versions
Version
Date
Drafted by
Purpose
V10
21/05/2019
Ludovic Penaud
User Guide
The purpose of...
Principle of calculation and recognition
Principle of calculation and recognition
Definition of an Agreement
The new definition of leases involves:
firstly, the presence of an identified asset;
secondly, control by the lessee of the right of use on the identified asset.
In order for the asset to be identified, it must be explicitly or implicitly specified in the contract. The supplier should not have the substantive right to substit...
Impact on the financial statements (for the lessee)
Impact on the financial statements (for the lessee)
By clearly displaying the lease commitments on their balance sheets, the level of indebtedness for Lessees will increase. However, EBITDA will accordingly improve. In fact, though the operating lease appears as an operating expense in the income statement, the new recognition will include in the income statement:
firstly, depreciation of the ...
Purpose of the Lease tool
Purpose of the Lease tool
In employing the terminology used in the agreements and incorporating the prerequisites for the restatement of the IFRS 16 standard, Lease lets users provide a range of information in order to:
Build up an agreement library that enables easy browsing in agreements
Monitor changes in agreements over time based on events
Dynamically calculate the Rent Debt and the Right...
Lease Repository
Lease Repository
Flows
Flows are used in connection with generating export files. They are made up of:
CC02 Increase
CC03 Decrease
CC04 Cut Off
CC05 Revaluation decrease
CR01 Provision
CR02 Variation accrued unmatured interest
CR11 Reversal
FC01 Variation
FC02 Result N
FC03 Result N-1
FC04 Currency impact on opening
FC05 Currency impact on average rate
FC07 Capitalized interests
FE01 Entry
FE0...
Lease Agreement Library: Terminology
Lease Agreement Library: Terminology
The purpose of this section is to define the significant concepts used when creating an agreement and those used for the calculations.
Initial Term
The initial term is the duration scheduled when the original agreement is signed. It can be referred as the contractual term. It does not take into account any renewal periods which are the subject of an amendmen...
Other cases
Other cases
Note: In Lease, the accounting entry for the split of current debt and non-current debt is netted. Case study 8.2 shows the principle of recognition for debt entries in Lease.
Lease payable in advance + Basis 360 asset and liability + repayment on disbursements
Initial condition
Payment schedule
Debt depreciation
Depreciation of the asset
Accounting entry as at 30.11.2018 ...
Conversion in Lease
Conversion in Lease
IAS 21 Norm Focus
IAS 21, Effects of Changes in Foreign Exchange Rates
IAS 21, Effects of Changes in Foreign Exchange Rates provides guidance on the recognition of foreign currency transactions and foreign operations in the financial statements and how to convert financial statements in the consolidated currency. An entity shall determine its functional currency (for each of...
Modified Approach
Modified Approach
IFRS16 Focus
In the modified approach, there is no restatement of comparative information. The cumulative effect is recognized as an adjustment to the opening balance of retained earnings (or, if applicable, another component of equity).
Impact on the debt:
Rental debt is determined on the basis of a discount of the rents remaining to be paid on the date of first application.
...
Purchase option and Residual value of the Asset
Purchase option and Residual value of the Asset
Purchase Option = Yes
Initial Conditions
Purchase Option
Purchase Option value
Debt depreciation effect
The exercise price of the call option is taken into account in discounting rents. The final debt before exercise of the call option will be equal to the exercise price of this option.
Asset effect
There is no residual val...
Cash Approach for Prepaid expenses and Accrued expenses entries
Cash Approach for Prepaid expenses and Accrued expenses entries
« On Disbursements » option
Contractual terms of the contract
This option is activated in the "Accounting" block of the "contract clauses" of the contract:
Note: A number of days off can be entered to reflect the cash gap.
Visualization of the effects in the amortization of the debt
The contractual schedule is declined in "debt am...
Reduction of Leasing Scope
Reduction of Leasing Scope
Background
This note is an addendum to the current processing of events considered by Lease.
To recap, on a lease in which the value of the right of use is unknown, the debt is revalued (upwards or downwards) during the life cycle of the lease if at least one of the following elements changes:
the rent
the term
the discount rate
The right of use adjustment is then t...