SellCo sells a building to BuyCo for cash of CU1,800,000, which is its fair value at that date. The previous carrying value of the building is CU1,000,000. At the same time, SellCo enters into a lease with BuyCo conveying back the right to use the building for 18 years. Annual payments are CU120,000 payable at the end of each year, which is at market rate. The transfer qualifies as a sale based on the guidance on satisfying a performance obligation … Continue reading
Even if an asset is specified, a customer does not have the right to use an identified asset if, at inception of the contract, a supplier has the substantive right to substitute the asset throughout the period of use (i.e., the total period of time that an asset is used to fulfil a contract with a customer, including the sum of any non-consecutive periods of time).… Continue reading
Even if an asset is specified, a customer does not have the right to use an identified asset if the supplier has the substantive right to substitute the asset throughout the period of use. A supplier’s right to substitute an asset is substantive only if both of the following conditions exist:
- the supplier has the practical ability to substitute alternative assets throughout the period of use (for example, the customer cannot prevent the supplier from substituting the asset and alternative
The first part of calculations and background information for the simple case IFRS 16 Leases is dicsussed on the web page listed here.
We will not repeat every quarterly payment/journal entry. However the quarterly payment as at 1 December 2015, the year-end financial closing entries and the indexing as at 1 March 2016 will be discussed here.
Qtr payment 1 December 2015:… Continue reading
Some illustrative background to ‘Right to Use’
Throughout the period of use the lessee has to meet the following two rights:
- the right to obtain substantially all of the economic benefits from the use of the identified asset, and
- the right to direct the use of the identified asset.