Insights

At the commencement of a lease, IFRS 16 requires a lessee to measure the lease liability at the present value of the lease payments that are not paid at that date. This liability includes both fixed payments (including in-substance fixed payments) and variable lease payments that depend on an index or rate, and represents the starting point for the measurement of the related right-of-use asset.

On February 19, 2019, Finance Minister Carole James tabled British Columbia’s 2019-20 budget. This budget sees the province experiencing strong economic growth (the strongest in the country at 2.7%) and making significant investments in various social and economic areas.

Making sense of what's next.

IFRS 16 makes significant changes to sale and leaseback accounting. A sale and leaseback transaction is one where an entity (the seller-lessee) transfers an asset to another entity (the buyer-lessor) for consideration and leases that asset back from the buyer-lessor

Many recent accounting standards include significant transition reliefs to make first time application simpler – IFRS 16 is no exception. Appendix C to IFRS 16 contains all the details of the transition provisions that are available.

A power purchase agreement (PPA) is a long-term contract under which an entity (the Buyer) agrees to purchase energy (e.g., electricity or thermal energy) for a period of time from another entity that generates the energy (the Seller), usually as a method of fixing the Buyer’s price of energy.

Under IFRS 16 ‘Leases’, determining the correct ‘lease term’ is significant for a number of reasons. Firstly, the longer the lease term, the larger the lessee’s right-of-use asset and lease liability will be. Secondly, the length of the lease term determines whether a lease qualifies for the short-term lease exemption.

How do you treat a variable lease payment in the financial statements of an interim period?