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IFRS Disclosure of IAS 17 Leases

IFRS Disclosure of IAS 17 Leases

IFRS Disclosure of IAS 17 Leases – The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) (collectively, the Boards) have substantially completed re-deliberations on new standards that would significantly change the accounting for leases and could have far-reaching implications for a company’s finances and operations.

The standards the IASB and the FASB plan to issue would require lessees to recognise most leases on their balance sheets as lease liabilities with corresponding right-of-use assets. For IFRS reporters, lessor accounting, in essence, would not change

IFRS Disclosure of IAS 17 Leases Disclosure

IFRS Disclosure of IAS 17 Leases – Impairment

Lessee disclosures would be to enable financial statement users to assess the amount, timing and uncertainty of cash flows arising from leases. Lessees would exercise judgement to determine the appropriate level at which to aggregate, or disaggregate, disclosures so that meaningful information will not be obscured by insignificant details or by groupings of items with different characteristics.

IFRS Disclosure of IAS 17 Leases- Quantitative disclosures

Quantitative disclosures Lessees would be required to disclose the following quantitative information:

  • Amortisation of right-of-use assets, split by class of underlying asset
  • Interest on lease liabilities
  • Short-term lease expense for such leases with a lease term greater than one month
  • Small asset lease expense
  • Variable lease expense
  • Income from sub-leasing right-of-use assets
  • Total cash outflow for leases
  • Additions to right-of-use assets
  • Gains and losses arising from sale and leaseback transactions
  • Closing carrying amount of right-of-use assets, split by class of underlying asset The new standard would require lessees to present all lessee disclosures in a single note or separate section in its financial statements.

All quantitative lessee disclosures would be required to be presented in tabular format, unless another format is more appropriate. Lessees would also be required to disclose a maturity analysis of lease liabilities in accordance with paragraphs 39 and B11 of IFRS 7

Financial Instruments: Disclosures. Lessees would be required to disclose this maturity analysis separately from the maturity analyses of other financial liabilities.

IFRS Disclosure of IAS 17 Leases

Qualitative disclosures Lessees would be required to disclose sufficient additional information to satisfy the overall disclosure objective. The new standard would supplement this requirement with a list of specific disclosure objectives and illustrative examples to demonstrate how a lessee might comply with this requirement.

IFRS Disclosure of IAS 17 Leases -Operating leases

Disclosure The disclosures that would be required for lessors are intended to help financial statement users understand the amount, timing and uncertainty of lease-related cash flows.

  • These disclosures would include the amounts of recognised lease-related assets and liabilities.
  • Significant judgements and assumptions about lease terms, payments, the existence of residual value guarantees and options to extend or terminate a lease.
  • Lessors would exercise judgement to determine the level at which to aggregate
  • Dis-aggregate, the disclosures.

Disclosures would need to be aggregated or dis-aggregated at an appropriate level so that the information is meaningful to the financial statement users and is not obscured by insignificant details or by grouping items with different characteristics.

IFRS Disclosure of IAS 17 Leases -General disclosure requirements Lessors would be required to disclose information about the nature of leases, such as:

  • A general description of the leases
  • The basis, and terms and conditions, on which variable lease payments are determined
  • The existence, and terms and conditions, of options to extend or terminate the lease
  • The existence, and terms and conditions, of options for a lessee to purchase the underlying asset As noted above, the new standard would also require lessors to disclose information about the significant judgements and assumptions made in accounting for leases.

IFRS Disclosure of IAS 17 Leases

A lessor might disclose information about its judgements and assumptions associated with:

  • The determination of whether a contract contains a lease
  • The identification of the lease and non-lease components of a contract
  • The allocation of the consideration in a contract between the lease and non-lease components
  • The initial measurement of the residual asset included in the net investment in the lease Lessors would also disclose information about activities used to manage risks associated with the residual value of their leased assets.

IFRS Disclosure of IAS 17 Leases – A lessor might disclose:

  • Its risk management strategy for residual assets
  • Any other means by which the lessor reduces its residual asset risk. Lessors would also disclose lease income recognised in the reporting period, in a tabular format.

IFRS Disclosure of IAS 17 Leases- For finance leases: The disclosure would include:

  • Profit or loss recognised at the commencement date
  • The interest income on net investments in leases (i.e., lease receivables and residual assets), either individually for each component of the net investment or in the aggregate
  • For operating leases, lease income relating to lease payments
  • Lease income relating to variable lease payments not included in the measurement of net investments in finance leases

IFRS Disclosure of IAS 17 Leases -Other quantitative and qualitative disclosures :

Finance leases Under the new standard, lessors would be required to qualitatively and quantitatively explain significant changes in the balance of the net investment in their finance leases during the reporting period.

IFRS Disclosure of IAS 17 Leases- lessor accounting

Disclosure: In addition to the lessee and lessor disclosure requirements discussed previously, the new standard would require an intermediate lessor to disclose the following information relating to its subleases:

  • A general description of the leases
  • The basis, and terms and conditions, on which variable lease payments are determined
  • The existence, and terms and conditions, of options to extend or terminate the lease
  • The existence, and terms and conditions, of residual value guarantees provided by the sub-lessee
  • The restrictions or covenants imposed by leases.

IFRS Disclosure of IAS 17 Leases: Business combinations

A seller-lessee in a sale and leaseback transaction would be required to disclose any gains or losses arising from the transaction separately from gains or losses on disposals of other assets.

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IFRS IAS 17 Leases

IFRS IAS 17 Leases

IFRS Disclosure of IAS 17 Leases

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