Right-of-use assets | Annualreporting.info

IAS 36 What is a lease impairment?

A right-of-use asset will frequently be included in a cash generating unit to be tested for impairment. 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. The most significant part of the right-of-use asset will often be the lease liability, which is the present value of the lease payments discounted at the interest rate implicit in the lease if this rate is … Read more

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
  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 arrangement
  3. By one or more of the parties to the joint arrangement on behalf of the joint arrangement. Generally, this would be evidenced in the contract and the parties to the joint arrangement
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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.

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;
  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 to bearer plants;
  4. intangible assets related to agricultural activity; and
  5. right-of-use assets
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Hyperinflation in Argentina

Argentina is now 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

IAS 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 of purchasing power during the credit period;
  • interest rates,
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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. In our view, 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 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 carrying amount and the recoverable amount of a … Read more

Impairment of right-of-use assets

In IFRS 16, lessees must record a right-of-use asset and a lease liability for all lease arrangements in their statement of financial position. Under IFRS 16, these ‘new’ right-of-use assets will be subject to the impairment requirements of IAS 36. Impairment of right-of-use assets

When to test for impairment? Impairment of right-of-use assets

Similar to other assets, a right-of-use-asset will only be tested for impairment when impairment indicators exist. If impairment indicators exist, an entity must determine whether the right-of-use-asset can be tested on a stand-alone basis or whether it will have to be tested at a Cash Generating Unit level (GCU-level). This will depend on whether the right-of-use-asset generates largely independent cash inflows from other assets … Read more