IAS 36 What is a lease impairment?

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IAS 36 What is a lease impairment? IAS 36 What is a lease impairment

Simple, it is a right-of-use asset and will frequently be included in a cash generating unit to be tested for impairment.

The right-of-use-asset

At initial recognition, the right-of-use-asset equals the recognised lease liability, plus any lease payments made at or before the commencement date, less any lease incentives received, plus any initial direct costs incurred by the lessee and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset and restoring the site on which the leased asset is located.

Lease liability

The most significant part of the right-of-use asset will often be the lease liability, … Read more

IFRS 16 Leases and joint arrangements

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IFRS 16 Leases and joint arrangements – Entities often enter into joint arrangements with other entities for certain activities (e.g., exploration of oil and gas fields, development of pharmaceutical products).

A contract for the use of an asset by a joint arrangement might be entered into in a number of different ways, including:

  1. Directly by the joint arrangement, if the joint arrangement has its own legal identity IFRS 16 Leases and joint arrangements
  2. By each of the parties to the joint arrangement (i.e., the lead operator and the other parties, commonly referred to as the non-operators) individually signing the same arrangementIFRS 16 Leases and joint arrangements
  3. By one or more of the parties to the joint arrangement on behalf of the joint
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IAS 41 Agricultural activity and produce

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IAS 41 Agricultural activity and produce – The objective of IAS 41 is to prescribe the accounting treatment and disclosures related to agricultural activity.IAS 41 Agricultural activity and produce

Scope IAS 41 Agricultural activity and produce

IAS 41 shall be applied to account for the following when they relate to agricultural activity:

  1. biological assets, except for bearer plants; IAS 41 Agricultural activity and produce
  2. agricultural produce at the point of harvest; and
  3. conditional or unconditional grants relating to a biological asset measured at its fair value less costs to sell.

IAS 41 does not apply to:

  1. land related to agricultural activity;
  2. bearer plants related to agricultural activity. However, IAS 41 applies to the produce on those bearer plants;
  3. government grants related
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Hyperinflation in Argentina

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Hyperinflation in Argentina – Argentina is now (October 2019) considered to be a hyperinflationary economy. IAS 29 – Financial Reporting in Hyperinflationary Economies is therefore applicable to entities whose functional currency is the Argentine peso.

Assessment of the situation

Hyperinflation in ArgentinaIAS 29 sets out a number of quantitative and qualitative characteristics for the purpose of assessing whether an economy is hyperinflationary (IAS 29 3), including:

  • the general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency (e.g., the US dollar or the euro);
  • transactions are conducted in terms of a relatively stable foreign currency;
  • sales and purchases on credit take place at prices that compensate for the expected loss
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Treatment of lease liabilities

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Treatment of lease liabilities- The recognition of right-of-use assets with corresponding lease liabilities raises the question of whether and how the lease liabilities associated with the right-of-use assets should be considered when performing impairment assessments.

The treatment of lease liabilities may differ in practice depending on whether the recoverable amount is based on the assets’ fair value less cost of disposal (FVLCD) or value in use (VIU).

In general, liabilities are ignored when performing an impairment test of a cash generating unit (CGU), meaning that the starting point would be that both the carrying amount of the lease liabilities and the respective future lease payments would be ignored when determining the … Read more

Impairment of right-of-use assets

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Impairment of right-of-use assets explains the lease assets now on the balance sheet and as a result also susceptible of impairment risks to be accounted for. Impairment of right-of-use assets

Right-of-use asset is an asset that represents a lessee’s right to use an underlying asset for the lease term.


A contract conveys the right to control the use of an identified asset if the customer has both the right to obtain substantially all of the economic benefits from use of the identified asset and the right to direct the use of the identified asset throughout the period of use/lease.

The right-of-use asset is depreciated over the lease term

  • The carrying amount of the asset and
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Implementation IFRS 16 Leases Air France KLM

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Implementation IFRS 16 Leases Air France KLMImplementation IFRS 16 Leases Air France KLM – In the Registration Document 2018 including the annual financial report by AIR FRANCE KLM GROUP the Group implemented IFRS 16 and IFRS 15 and IFRS 9. Here are some excerpts from the document to illustrate the effects:

[Air France KLM – 2018 Registration document – page 220]

note 2. Restatement of 2017 Financial statements

Since January 1, 2018, the Air France – KLM Group has applied the following three new standards:

IFRS 9 “Financial Instruments”

  • IFRS 15 “Revenue Recognition from Contracts with Customers”

This standard came into force on January 1, 2018.

In accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”, the standard has Read more

Leases capitalisation on the balance sheet

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Summary Leases capitalisation on the balance sheet

IFRS 16 includes a single accounting model for all leases by lessees.

The main implications of the new standard on current practice for lessees include:

  • No more operating leases under IFRS 16 (subject to the exceptions described below)
  • All leases (subject to the exceptions described below) will be capitalised on the balance sheet by recognising a ‘right-of-use’ asset and a lease liability for the present value of the obligation
  • No rental expense! i.e. no more straight-line expenses for operating lease costs. All leases will incur a front-end loaded expense, comprising depreciation on the right-of-use asset, and interest on the lease liability
  • When initially measuring the right-of-use asset and a lease
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Case IFRS 16 Lease car contract

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Case IFRS 16 Lease car contractCase IFRS 16 Lease car contract – Because this is a quite frequently used type of lease it is good to get an understanding of how to apply IFRS 16 on a car lease. This includes all the detailed calculations in spreadsheet examples (including Excel functions used) needed to record the correct entries.

The case:

Contract commencement date: 27/02/2017
Lease term: 48 months
The lessor’s investment in the car is EUR 20,872.33
The residual value of the car is EUR 12,112.00
The monthly lease payment is EUR 231.08 payable at month-end

The lease payment includes the payment of interest and principal and is an operating lease that includes car related taxes, maintenance and repairs, car insurance, administration … Read more