The Changes for the IFRS 16
The Judgements previously decided by the interpretations committee for the IFRS were revisited in 2002. The IFRS 16 specifically, which deals with leaseback transactions and sales, was given particular attention.
Previously, the transactions that satisfied the necessities of IFRS 15 which was about Revenue from Contracts with Customers, were to be regarded as a transaction. The right of use asset would generate revenue which could affect the percentage of payment due from these transactions.
It was advised by the committee that in cases that involved the right of use assets should include a liability. They also accepted the fact that the current IFRS 16 did not give any insight on how this would be evaluated.
This whole predicament was retarded as a serious issue that will impact both the amount considered by the council as a right of use asset and also the amount due as lease liability.
Subsequently, a draft was released which was meant to amend the IFRS 16 and to explain the number of payments due on lease liability in sales as well as leaseback transactions. It also provided more insight and guidance regarding the aforementioned issues.
There was an additional paragraph that included a new list of things whose payments will be a part of the anticipated lease payments in sales and leaseback transactions. Some of these included:
- Sums anticipated to be paid by seller-lessees under residual value guarantees
- Variable lease payments
- Fixed payments less any lease incentives
- Expenses of fines for ending the lease