IFRS 16 Lease Discount Rate
This free, guided checker walks your finance team through the key decision points for IFRS 16 Lease Discount Rate. Answer a few questions to see the likely treatment and the evidence to document.
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IFRS 16 Sale and Leaseback
This free, guided checker walks your finance team through the key decision points for IFRS 16 Sale and Leaseback. Answer a few questions to see the likely treatment and the evidence to document.
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This tool is a high-level IFRS screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
The questions this tool walks you through
Here is what the checker asks and why each step matters. Prefer to talk it through? Contact us and we will help directly.
Does the transaction involve the transfer of an asset by the seller-lessee and a lease of the same asset back from the buyer-lessor?
A sale and leaseback combines a transfer of an asset with a leaseback of that same asset from the buyer-lessor. Assess the transfer under the IFRS 15 control model and the leaseback under IFRS 16 together, because the sale conclusion drives whether any gain is recognised. The trap is applying disposal accounting to the transfer in isolation and ignoring the linkage created by the leaseback.
Apply standard sale or lease accounting separately rather than the sale and leaseback guidance (IFRS 16.98).
Official guidance: IFRS issued standards
Does the transfer of the asset satisfy the IFRS 15 requirements to be accounted for as a sale?
A sale occurs when control of the asset transfers to the buyer-lessor; failed sale indicators include repurchase agreements, variable payments tied to use, and the buyer lacking control.
Use the interactive tool above to see how this applies to your situation.
Official guidance: IFRS issued standards
When the transfer is not a sale, has the seller-lessee continued to recognise the transferred asset and accounted for the proceeds as a financial liability?
Failed sale treatment under IFRS 16.102 requires the seller-lessee to continue recognising the transferred asset and to recognise a financial liability under IFRS 9 equal to the proceeds received from the buyer-lessor. No gain is recognised and no leaseback right-of-use asset arises, because control has not transferred. Reassess only if the terms later change so that the IFRS 15 sale criteria are met.
Continue recognising the asset and account for the proceeds as a financial liability under IFRS 9 (IFRS 16.102(a)). Apply failed-sale treatment - retain the asset and recognise a financial liability - before recognising any sale gain or leaseback asset (IFRS 16.102).
Official guidance: IFRS issued standards
Is the leaseback classified as a finance lease or an operating lease from the seller-lessee perspective?
Under IFRS 16 the seller-lessee accounts for every leaseback using the single right-of-use model, so the finance-versus-operating distinction affects only the analysis of how much of the right of use is retained. A leaseback that retains substantially all risks and rewards leaves a larger retained proportion, which reduces the gain recognised on transfer. Use this classification to frame the retained-rights proportion, not to keep the leaseback off balance sheet.
Use the interactive tool above to see how this applies to your situation.
Official guidance: IFRS issued standards
Has the lease liability been measured at the present value of lease payments discounted using the seller-lessee incremental borrowing rate?
The leaseback liability equals the present value of future lease payments over the leaseback term using IBR when the implicit rate is not readily determinable.
Measure the leaseback liability at present value under IFRS 16.26 before recognising the right-of-use asset.
Official guidance: IFRS issued standards
Has the right-of-use asset been measured as the proportion of the former carrying amount retained through the leaseback?
The ROU asset equals the retained portion of the pre-transfer carrying amount; for operating leasebacks the retained proportion relates to the rights not transferred to the buyer-lessor.
Measure the right-of-use asset at the retained proportion of the previous carrying amount (IFRS 16.100(a)).
Official guidance: IFRS issued standards
Has any gain or loss on the transfer been limited to the amount relating to the rights transferred to the buyer-lessor?
The seller-lessee recognises only the gain or loss attributable to the rights transferred; the gain relating to the retained right of use is not recognised under IFRS 16.100(a).
Limit the recognised gain or loss to the proportion of rights transferred to the buyer-lessor (IFRS 16.100(a)).
Official guidance: IFRS issued standards
For an operating leaseback, has the deferred gain been presented as a financial liability adjustment rather than immediate P&L recognition?
Unlike legacy IAS 17, IFRS 16 does not defer and amortise a sale and leaseback gain over the lease term. Instead the gain is limited at the transfer date to the rights transferred to the buyer-lessor, and the effect of the retained right of use is reflected within the right-of-use asset and lease liability (IFRS 16.100(a)). The common misapplication is carrying a separate deferred-gain balance that no longer exists under IFRS 16.
Recognise only the transferred-rights portion of the gain; embed the retained-rights effect in the right-of-use asset (IFRS 16.100(a)).
Official guidance: IFRS issued standards
Has the seller-lessee derecognised the transferred portion of the asset carrying amount against the sale proceeds received?
Derecognise the full asset carrying amount, recognise a right-of-use asset for the retained portion, a lease liability, and cash proceeds, with any limited gain or loss in profit or loss.
Post the derecognition and leaseback recognition entries before period close (IFRS 16.100).
Official guidance: IFRS issued standards
Has the buyer-lessor accounted for the purchase and lease separately as asset acquisition and lessor lease?
The buyer-lessor recognises the acquired asset and a lease receivable or investment property depending on classification; seller-lessee and buyer-lessor accounting are assessed independently under IFRS 16.100(b).
Coordinate buyer-lessor accounting for the asset purchase and the lease separately (IFRS 16.100(b)).
Official guidance: IFRS issued standards
Have variable lease payments linked to the asset's use been excluded from the initial lease liability when they do not depend on an index or rate?
Variable payments based on sales or usage are excluded from lease liability initial measurement and expensed as incurred unless they depend on an index or rate.
Reassess the lease payments included in the liability and exclude non-index or non-rate variable payments (IFRS 16.27).
Official guidance: IFRS issued standards
Which outcome best matches the completed sale and leaseback analysis?
Disclose the sale and leaseback transaction, the gain or loss recognised, the leaseback measurement, and key judgements on the transfer assessment under IFRS 16.53(i) and the IFRS 15 control model.
Finalise sale and leaseback accounting with the limited gain and the leaseback right-of-use asset (IFRS 16.100). Apply failed-sale treatment with asset retention and a financial liability (IFRS 16.102).
Official guidance: IFRS issued standards
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