INSTRUCTIONS

Please Note : Revised due date is now 23 March 2018

Section 1) Lease enquiry - Determine whether a contract contains a lease
Step
1
2
3
4
5

Section 2) Lease Register template - Document details contained in lease arrangement and calculate lease impa
Step
1
2
2 (i)
2 (ii)
2 (iii)
2 (iv)

3
3 (i)
3 (ii)

Examples and guidance

See tab "example 1 option extension" and tab "example 2 option termination" for examples
See tab "AASB 16 guidance and definition" for additional guidance on the new leasing standard
INSTRUCTIONS

Please Note : Revised due date is now 23 March 2018

Section 1) Lease enquiry - Determine whether a contract contains a lease

The objective of the "Lease enquiry" tab is to understand whether there are any hidden or unknown leases (eg a
Identify the appropriate team member for the questions (note this may include more than just the School's busin
Work through the tab "Lease enquiry", reaching out to the Corporate Leasing Project Team if assistance is require
Document the response in the "Leases enquiry" tab
Where potential lease agreements are identified through these questions, then proceed to "Lease Register" tab a
each lease
Note: Section 1 is only applicable if you are unsure if a contract contains a lease. For all known leases, please p

Section 2) Lease Register template - Document details contained in lease arrangement and calculate lease impact und

Document the details contained in each lease contract (complete the questions in columns B to P for each lease)
Determine the incremental borrowing rate of each lease
Go to tab 'TCV rate'
Put the lease end date in cell C2. A rate will be automatically calculated in cell E2.
Add 1.80% to the rate derived in step 2 (cell C2) to get the suggested incremental borrowing rate for the purpose
The combined rates of Step 1 and Step 2 will be your incremental borrowing rate that you will use to calculate yo
register' under column Q
Calculate the lease liability component using the incremental interest rate at initial application date. (i.e calculate
Go to tab "modified retrospective 2" and follow this example. You will require a sheet for each lease/category. Pl

Populate all cells in blue using data gathered as part of step 1 and step 2 to calculate the lease liability and the co
calculation in cells D7 and D10. (D7 and D10 should be the same $ value. The NPV of the lease liability should eq
Populate the "Lease Register" tab with the right-of-use asset and lease liability amount to determine the financia
column V)

Examples and guidance

See tab "example 1 option extension" and tab "example 2 option termination" for examples
See tab "AASB 16 guidance and definition" for additional guidance on the new leasing standard
e leases liability)
each lease calculation
Frequently Asked Questions
Do I need to include lease contracts that are not material in the Lease Register Template?
(i.e. lease contracts contain value of individual asset less than $5,000)

What is the initial application date?

Do I need to provide lease contract details for leases that expire before 1 July 2019?

What category would laptops/computers be classified as? (Column H in tab ‘Lease Register’
- Right-of-use asset category)

How do I know if a lease is a peppercorn lease?

What is the impact of peppercorn lease?

How do I calculate the remaining contract consideration of the lease contract? (Column P
of ‘Lease Register’ tab)

Why do I need to calculate an incremental borrowing rate?

How do I calculate the incremental borrowing rate?

Why do I need to calculate a right of use asset and a lease liability for each lease contract?

How do I calculate the lease asset and lease liability?

Yes. All existing lease contracts need to be included in the lease register template. For example, please include all laptop, iPad,
contract details in the Lease Register Template provided.

For individual asset with low value (less than $5,000):

How to complete lease register tab:
· Complete columns from A to T
· “Yes” under column “J – low value asset”
· No calculation is required for Column U to Y

How to complete modified retrospective (blank) tab:

· No calculation is required on low value asset.

The initial application date is 1 July 2019. This is the date that the new accounting standard comes into effect and there is a cha
contracts.

Yes. All lease contract details that are active on 1 July 2017 are to be included in the Lease Register Template.

Laptops and computers would be classified under ‘Plant Equipment and Vehicles’.

The value of the monthly lease payments do not reflect the value (or cost) of the asset being leased. i.e. the monthly lease ren
the standard cost you would pay for a lease contract under normal market circumstances. For example, a $10 or $0 monthly le
land would be considered a peppercorn lease.

Under peppercorn lease, the asset is under-valued but not low valued.
How to complete lease register tab:
· Complete all columns
· Under column “E” asset description (include the wording “ peppercorn lease”

How to complete modified retrospective (blank) tab:

· Same as other assets

To calculate the remaining contract consideration, multiply the number of months left in the lease contract after 1 July 2019 by
amount.

The incremental borrowing rate is used to calculate the right-of-use asset and the lease liability by discounting the remaining c

To calculate the incremental borrowing rate, go to tab 'TCV rate' in the Lease Register Template.

Put the lease end date in cell C2. A rate will be automatically calculated in cell E2. Add 1.80% to the rate derived cell E2 to get t
rate for the purpose of this assessment.
For example, if a lease end date is 20/09/20. By putting this lease end date into cell C2 in the tab ‘TCV rate’, the calculated rate
incremental borrowing rate for this lease contract is 3.933% (2.133%+1.8%)

Under the new accounting standard for leases, we must calculate the individual impact of each signed lease contract.

To calculate the right of use asset and the lease liability for the lease, go to the tab ‘modified retrospective (blank)’ and popula

In cell D37, include the annual lease payments for all remaining years left in the lease contract after 1 July 2019. For example, i
payment of $100 and the lease contract end date is 30/06/2021, $100 would be entered into cell D37 and $100 would be ente
remaining two years in the lease contract after 1 July 2019)
Leases Heat Map - AASB 16

Leases Identification - does the contract contain a lease?

Number Factor
Question

1 Record a separate line for each type of asset/lease

2
3
4
5
6
 Only required if answer is "yes" to "identification of asset question

Identification of asset Right to control for use

Is there any equipment's that the School pays a monthly fee 1. Does the School obtain
to use? (that has not already been identified on the lease substantially all of the
register) economic benefits from this
asset? (is the school the only
entity using this asset?)

2. Does the School have the

right to direct how the asset
is used? (e.g. photocopier)

ch type of asset/lease
nswer is "yes" to "identification of asset question

Number of assets $ Value Attached services

What is the approximate estimated Do you have any situations
value of the asset? where the School receives a
service attached to an asset?
Does the contract meet the definition of a
lease?
If yes, continue to tab 'lease register' and
document details of the lease
arrangement
 Step
Number Name of the External/Internal lessor Contract no. Asset description
lessor

Name of the If the lessor is a This column is for A brief description of

lessor department/entity controlled by the identification of the specified asset in
the State of Victoria, please select the lease contract, the lease . E.g.
"VPS department/entity"; fill in the title of photocopier,
otherwise, select "External entity" the contract if it equipment
doesn't have a
reference no.

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
 Step 1: Document the details of the lease contract
Where are these How is lease contract Right -of- use asset Address Low value asset
lease agreements/ information / data category (leased asset
contracts stored? maintained? type)

At the school or at Is lease information What category is the This column only State Yes or No if
DET? stored in excel or leased asset classified applies if the the underlying
cases 21? as? leased asset is land asset's value
Land, Buildings, or buildings contained in the
Equipment, Motor lease is below
Vehicle, Other (please $5,000 when it's
specify) new
tract
Contract status Existing lease Contract Contract expiry Remaining
classification commencement date date contract term after
the initial
application date
(month)

Active or not yet Operating lease For contracts already DD/MM/YYYY Insert the
commenced or Finance lease started, put the initial remaining number
application date of months left in
the contract
DD/MM/YYYY
 Calcula
Remaining contract
consideration
(nominal) ($)
Incremental
borrowing rate at
initial application
date Lease component
Monthly rental Based on rates Description of the identified asset 1
multiplied by determined by DTF E.g. office floor?
number of months See tab ''
remaining in lease
contract
 Calculation: Lease component
Consideration for lease component
(nominal) ($)
Total payments for the identified
underlying asset 1 after the initial
application date
Cost of the right-of-use asset for lease
component 1($)
For lease component 1: Lease liability
using the incremental interest rate at the
initial application date - accrued lease
payment before the initial application
date + prepaid lease payment before the
initial application date + amortised
carrying amount of previously capitalised
cost for the operating lease
 Financial impact
Total cost of assets
upon initial
recognition ($)

Lease liability for lease component 1 using the

incremental interest rate at initial application date
($)
NPV for the lease payment liabilities related to the
identified underlying asset

-
Financial impact
Total financial liability upon
initial recognition using the
incremental interest rate at
initial application date ($)

-
 Lessee accounting: calculation of right-of-use assets and lease liabilities
Partial retrospective 2

Calculation outcome
R/E -
Right-of-use asset - recognise the right-of-use asset upon initial application

Lease liability 0 recognise the lease liability upon initial application

POPULATE CELLS IN BLUE

INPUT DATA FOR CALCULATION
Lessee:
Lessor:
Leased asset:

Lease period to
Lessee's incremental borrowing rate at initial application date(p.a.) Add 1.80% to rate calculated in 'TCV Rate' tab.
Initial lease term years
Remaining lease period at the initial application date - 1 July 2019 years
Reasonably certain of extending lease or entering into a similar lease arrangement once current lease is expired
Length of extension
Remaining lease period at the initial application date including extension option if applicable
Annual payment

Notes:
If there is a lease extension option and the lessee is reasonably certain to exercise the option, the payment data in the extension period should be included in the table.
If there is a lease termination option and the lessee is reasonably certain to exercise the option, the lease payment information included in the table should only include those up to the estimated termination date.
The cost of termation (e.g. penalty) should be included.
Lease liability and right-of-use asset needs to be remeasured when there is a lease modification or revised estimated variable lease payment dependent on a rate or index.

Populate remaining lease payments from 1 January 2019:

Year Number Fixed lease
(Populate list to payment per year
include each year (nominal) ($)
end during
remaining term of
lease) Total net
payment(nominal) ($) Interest rate Net present value ($)

2019-20 1 - - 0% -
2020-21 2 - - 0% -
2021-22 3 - - 0% -
2022-23 4 - - 0% -
2023-24 5 - - 0% -
2024-25 6 - - 0% -
2025-26 7 - - 0% -
2025-26 8 - - 0% -
2026-27 9 - - 0% -
2027-28 10 - - 0% -
2028-29 11 - - 0% -
2029-30 12 - - 0% -
- 0% -
- 0% -
- 0% -
- 0% -
- 0% -
 - 0% -
- 0% -
- 0% -

Total - - 0 - - -
 148448

Interest Depreciation
Lease liability at expense for the Right-of-use expense for the
year end year asset at year end year
- - -
- - - -
- - - -
- - -
- - #DIV/0! #DIV/0!
- - #DIV/0! #DIV/0!
- - #DIV/0! #DIV/0!
- - #DIV/0! #DIV/0!
- - #DIV/0! #DIV/0!
- - #DIV/0! #DIV/0!
- - #DIV/0! #DIV/0!
- - #DIV/0! #DIV/0!
- - #DIV/0! #DIV/0!
- - #DIV/0! #DIV/0!
- - #DIV/0! #DIV/0!
- - #DIV/0! #DIV/0!
- - #DIV/0! #DIV/0!
- - #DIV/0! #DIV/0!
- - #DIV/0! #DIV/0!
- - #DIV/0! #DIV/0!
- - #DIV/0! #DIV/0!

- #DIV/0!
 Lessee accounting: calculation of right-of-use assets and lease liabilities
Partial retrospective 2

Calculation outcome
R/E -
Right-of-use asset 1,688,514 recognise the right-of-use asset upon initial application

Lease liability -1,688,514 recognise the lease liability upon initial application

POPULATE CELLS IN BLUE

INPUT DATA FOR CALCULATION
Lessee: DET
Lessor: ABN
Leased asset: Office rent

Lease period 1/07/19 to 30/06/25

Lessee's incremental borrowing rate at initial application date(p.a.) 4.51% Add 1.80% to rate calculated in 'TCV Rate' tab.
Initial lease term 6 years
Remaining lease period at the initial application date - 1 July 2019 6 years
Reasonably certain of extending lease or entering into a similar lease arrangement once current lease is expired No
Length of extension -
Remaining lease period at the initial application date including extension option if applicable 6
Annual payment
313,333

Notes:
If there is a lease extension option and the lessee is reasonably certain to exercise the option, the payment data in the extension period should be included in the table.
If there is a lease termination option and the lessee is reasonably certain to exercise the option, the lease payment information included in the table should only include those up to the estimated termination date.
The cost of termation (e.g. penalty) should be included.
Lease liability and right-of-use asset needs to be remeasured when there is a lease modification or revised estimated variable lease payment dependent on a rate or index.

Populate remaining lease payments from 1 January 2019:

Year Number Fixed lease
(Populate list to payment per year
include each year (nominal) ($)
end during
remaining term of
lease) Total net
payment(nominal) ($) Interest rate Net present value ($)

2019-20 1 313,333 313,333 5% 313,333

2020-21 2 313,333 313,333 5% 299,815
2021-22 3 313,333 313,333 5% 286,879
2022-23 4 313,333 313,333 5% 274,502
2023-24 5 313,333 313,333 5% 262,659
2024-25 6 313,333 313,333 5% 251,326
2025-26 7 - - 5% -
2025-26 8 - - 5% -
2026-27 9 - - 5% -
2027-28 10 - - 5% -
2028-29 11 - - 5% -
2029-30 12 - - 5% -
- 5% -
- 5% -
- 5% -
- 5% -
- 5% -
 - 5% -
- 5% -
- 5% -

Total 1,880,000 - 0 - 1,880,000 1,688,514

 148448

Interest Depreciation
Lease liability at expense for the Right-of-use expense for the
year end year asset at year end year
1,688,514 1,688,514 562,838
1,437,188 62,007 1,125,676 562,838.16
1,174,529 50,675 562,838 562,838.16
900,027 38,831 -
613,148 26,454 - -
313,333 13,519 - -
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -

191,486 1,125,676
Lease End Date: 30-Jun-25 TCV Rate*: 2.709% * Interpolated Interest Rate from the TCV

TCV Yield Curve as at close of business 30-Jun-2017

COBDate Issuer Maturity CouponRate YieldRate

Dra
30-Jun-17 TCV 01-Jul-17 0 1.50
30-Jun-17 TCV 31-Jul-17 0 1.53
30-Jun-17 TCV 30-Aug-17 0 1.58
30-Jun-17 TCV 29-Sep-17 0 1.62
30-Jun-17 TCV 29-Oct-17 0 1.66
30-Jun-17 TCV 28-Nov-17 0 1.71
30-Jun-17 TCV 28-Dec-17 0 1.76
30-Jun-17 TCV 01-Jul-18 0 1.73
30-Jun-17 TCV 15-Nov-18 5.5 1.81
30-Jun-17 TCV 15-Jun-20 6 2.10
30-Jun-17 TCV 17-Oct-22 6 2.39
30-Jun-17 TCV 17-Dec-24 5.5 2.65
30-Jun-17 TCV 17-Nov-26 5.5 2.86
30-Jun-17 TCV 20-Oct-28 3 3.11
30-Jun-17 TCV 20-Oct-31 3 3.38
30-Jun-17 TCV 20-Oct-34 3 3.54
30-Jun-17 TCV 20-Oct-37 3 3.67
30-Jun-17 TCV 20-Oct-40 3 3.78
30-Jun-17 TCV 20-Oct-43 3 3.95
30-Jun-17 TCV 20-Oct-46 3 4.05
30-Jun-17 TCV 20-Oct-49 3 4.10
30-Jun-17 TCV 20-Oct-52 3 4.13
30-Jun-17 TCV 20-Oct-55 3 4.14
30-Jun-17 TCV 20-Oct-58 3 4.15
30-Jun-17 TCV 20-Oct-61 3 4.15
30-Jun-17 TCV 20-Oct-64 3 4.16
30-Jun-17 TCV 20-Oct-67 3 4.16
30-Jun-17 TCV 20-Oct-70 3 4.16
ated Interest Rate from the TCV Yield Curve corresponding to entered Lease End Date

Draft
 Lease register (for lessees)

Example 1:
• DTF has a contract with ABC company to rent office areas for Division XYZ. The contract commencement date is 1 July 2000.
• The contract term is 25 years (1 July 2000 to 30 June 2025), with annual rental of $105,000 for the first year, including cleaning service fee for $5,000. Payment is made in advance at the beginning of the each year.
• The annual rental increases by $10,000 each year during the contract term, but the cleaning service fee remains the same.
• There is a termination option in the contract, but DTF would need to pay penalty equivalent to 12 months' rental if it wish to exercise. DTF does not have the intention to exercise the option given the amount of penalty and other moving costs.
• There is an option for DTF to extend the contract for another 5 years, with the same annual rental increase as in the previous 25 years (cleaning service component is still $5,000). DTF is very certain to exercise the option based on the current business plan.
• Rental refund will be given to DTF at the beginning of the 9th year and 20th year of the contract at $10,000 each. If DTF chooses to exercise the extension option, another $10,000 rental refund will be given to DTF at the end of the extension period.
• The interest rate implicit in the lease is 6% p.a.
• The incremental borrowing rate at the initial application date is 6% p.a. (The initial application date is 1 July 2019, beginning of the 20th year of the contract)
• Initial direct cost for renovation of the rented office of $60,000 was incurred and paid by DTF.
• Estimated dismantling and removing cost to be incurred by DTF is $130,000.
• The initial direct cost, dismantling cost was capitalised and depreciated over the lease period. The net book value of the capitalised cost at the initial application date is $69,667.
• The amount expected to be paid under the residual value guarantee is $15,000.
• Fair value of the right-of-use asset to the rented office at the initial application date is $1,290,432. The fair value include that for the 5 year extension option of $600,000.

Lease identi

Counter-party - Counter- party Right -of- use- asset

Dept Portfolio - entity (Lessor) External/Internal lessor (Lessor) ABN Contract no. Asset description category Address

A brief description of the specified asset in

the lease

Please select from the draw-
down list
If the lessor is a
department/entity controlled
Please fill in the by the State of Victoria, please
portfolio select "VPS
department if your department/entity";
entity is a portfolio Leave it blank Name of the otherwise, select "External
entity for departments lessor entity"
This column is for the
identification of the lease
contract, fill in the title of
the contract if it doesn't
ABN of the lessor have a reference no.
If there is an extension option and the lessess
is reasonably certain to exercise the option,
list the extension option information in a
separate row
If there is a termination option and the
lessess is reasonably certain to exercise the
option, list the extension option information This column only applies if
in a separate row but illustrate all dollar Please select from the the leased asset is land or
amounts as negative draw-down list buildings

1 DTF ABC company External entity 48 123 123 L1234 Office for Division XYZ Non-specialised buildings Level 20, 1 Spring Street, Me

2 DTF ABC company External entity 48 123 123 L1234 Office for Division XYZ - extension option to b Non-specialised buildings Level 20, 1 Spring Street, Me

Total

Unclassified
d other moving costs.
ased on the current business plan.
nd of the extension period.

1880000 30000

Lease identification

Contract Remaining contract term after

Existing lease commencement the initial application date Extension option uncertain Termination option uncertain Remaining contract consideration
Low value asset Contract status classification date Contract expiry date (month) to exercise or not to exercise or not (nominal) ($)

Please describe the terms contract consideration for the

and the rental in the Please describe the terms, contract term after the initial
extension period including the penalty application date, including lease
component and non-lease
If there is an extension If there is a termination option component
option and the lessess is and the lessess is reasonably
Only select "Y" if the For contracts reasonably certain to certain to exercise the option, do Including fixed payments, variable
underlying asset's value is already started, put exercise the option, do not not include it here. Please list payments dependent on an index
below $5,000 when it's new the initial include it here. Please list the extension option information or a rate, residual value guarantee
and not highly dependent application date the extension option in a new lease line (row) but and other reasonably certain
on, or interrelated with Please select from Please select from please fill in the number of information in a new lease illustrate all dollar amounts as payment, less lease incentive
other assets the draw-down list the draw-down list DD/MM/YYYY DD/MM/YYYY months line (row) negative receivable

There is a termination option in

the contract, but DTF would
need to pay penalty equivalent
to 12 months' rental if it wish to
N Active Operating lease 7/1/2019 6/30/2025 72.00 None exercise. 1,910,000

There is a termination option in

the contract, but DTF would
need to pay penalty equivalent
to 12 months' rental if it wish to
N Active Operating lease 7/1/2025 6/30/2030 60.00 None exercise. 1,880,000

3,790,000

Unclassified
 313,333.33

Non-lease components Lease component 1: for identified asset 1

Fair value of the right-

of-use asset for lease
Incremental borrowing rate at Consideration for non- component 1 at the Consideration for lease Cost of the right-of-use asset for lease
implicit interest rate initial application date Non-lease components lease components($) Lease component 1 initial application date component 1 (nominal) ($) component 1($)

This is the value of right-of use asset under

Total payments for the the modified retrospective option 2
identified underlying asset 1
after the initial application date For lease component 1: Lease liability using
total payments related the incremental interest rate at the initial
Use incremental borrowing rate at to the non-lease Including fixed payments, application date - accrued lease payment
the contract commencement date components (e.g. This is the value of variable payments dependent before the initial application date + prepaid
(not the initial application date) if service component) for right-of use asset under on an index or a rate, residual lease payment before the initial
the interest rate implicit in the the contract term after the full retrospective value guarantee and other application date + amortised carrying
lease can not be readily Description of the nature of non- the initial application Description of the and modified reasonably certain payment, amount of previously capitalised cost for
determined lease components date identified asset 1 retrospective option 1 less lease incentive receivable the operating lease

6% 5% Cleaning service 30,000 Office floor 690,432 1,880,000 1,730,880

6% 5% Cleaning service 25,000 Office floor 600,000 1,855,000 1,254,898

55,000 1,290,432 3,735,000 2,985,778

Unclassified
 #REF! #REF! #REF!

Unclassified
 Lease component 2: for identified asset 2

Lease liability for lease

component 1 using the Fair value of the right-
Lease liability for lease incremental interest of-use asset for lease
component 1 using the rate at initial component 2 at the Consideration for lease Cost of the right-of-use asset for lease
implicit interest rate ($) application date ($) Lease component 2 initial application date component 2 (nominal) ($) component 2($)

Total payments for the This is the value of right-of use asset under
This is the value of lease identified underlying asset 2 the modified retrospective option 2
liability under the after the initial application
This is the value of lease modified retrospective date For lease component 2: Lease liability using
liability under the full option 1 and 2 the incremental interest rate at the initial
retrospective option Including fixed payments, application date - accrued lease payment
variable payments dependent before the initial application date + prepaid
NPV for the lease NPV for the lease on an index or a rate, residual lease payment before the initial
payment liabilities payment liabilities value guarantee and other application date + amortised carrying
related to the identified related to the identified Description of the reasonably certain payment, amount of previously capitalised cost for
underlying asset 1 underlying asset 1 identified asset 2 less lease incentive receivable the operating lease

1,135,987 1,661,213

1,650,854 1,254,898

2,786,841 2,916,111 - - - -

Unclassified
 #REF! #REF!

Unclassified
 Lease component 3: for identified asset 3 Financial impact

Lease liability for lease

component 2 using the Fair value of the right- Lease liability for lease
Lease liability for lease incremental interest of-use asset for lease Consideration for lease Lease liability for lease component 3 using the Fair value of the right- Total cost of assets
component 2 using the rate at initial component 3 at the component 3 (nominal) Cost of the right-of-use asset for component 3 using the incremental interest rate at of-use asset at the upon initial recognition
implicit interest rate ($) application date ($) Lease component 3 initial application date ($) lease component 3($) implicit interest rate ($) initial application date ($) initial application date ($)

This is the value of right-of use asset

Total payments for the under the modified retrospective
identified underlying asset option 2
3 after the initial
This is the value of lease application date For lease component 3: Lease
liability under the liability using the incremental
This is the value of lease modified retrospective Including fixed payments, interest rate at the initial application This is the value of lease This is the value of lease
liability under the full option 1 and 2 variable payments date - accrued lease payment before liability under the full liability under the modified
retrospective option dependent on an index or a the initial application date + prepaid retrospective option retrospective option 1 and 2
rate, residual value lease payment before the initial
NPV for the lease NPV for the lease guarantee and other application date + amortised NPV for the lease
payment liabilities payment liabilities reasonably certain carrying amount of previously payment liabilities NPV for the lease payment
related to the identified related to the identified Description of the payment, less lease capitalised cost for the operating related to the identified liabilities related to the
underlying asset 2 underlying asset 2 identified asset 3 incentive receivable lease underlying asset 3 identified underlying asset 3

690,432 1,730,880

600,000 1,254,898

- - - - - - - - 1,290,432 2,985,778

Unclassified
Financial impact

Total financial liability

Total financial liability upon initial recognition
upon initial recognition using the incremental
using the implicit interest rate at initial
interest rate($) application date ($)

1,135,987 1,661,213

1,650,854 1,254,898

2,786,841 2,916,111

Unclassified
Unclassified
 Lease register (for lessees)

Example 2:
• DTF has a contract with ABC company to rent office areas for Division XYZ. The contract commencement date is 1 July 2000.
• The contract term is 25 years (1 July 2000 to 30 June 2025), with annual rental of $105,000 for the first year, including cleaning service fee for $5,000. Payment is made in advance at the beginning of the each year.
• The annual rental increases by $10,000 each year during the contract term, but the cleaning service fee remains the same.
• There is a termination option in the contract available to DTF without any penalty. DTF is very likely to exercise the termination about two months before the expiry of the contract based on the moving plan.
• There is an option for DTF to extend the contract for another 5 years, with the same annual rental increase as in the previous 25 years (cleaning service component is still $5,000). DTF does not have the intention to exercise the option given the current moving plan and high r
• Rental refund will be given to DTF at the beginning of the 9th year and 20th year of the contract at $10,000 each. If DTF chooses to exercise the extension option, another $10,000 rental refund will be given to DTF at the end of the extension period.
• The interest rate implicit in the lease is 6% p.a.
• The incremental borrowing rate at the initial application date is 6% p.a. (The initial application date is 1 July 2019, beginning of the 20th year of the contract)
• Initial direct cost for renovation of the rented office of $60,000 was incurred and paid by DTF.
• Estimated dismantling and removing cost to be incurred by DTF is $130,000.
• The initial direct cost, dismantling cost was capitalised and depreciated over the lease period. The net book value of the capitalised cost at the initial application date is $69,667.
• The amount expected to be paid under the residual value guarantee is $15,000.
• Fair value of the right-of-use asset to the rented office at the initial application date is $1,290,432. The fair value include that for the 5 year extension option of $600,000.

Lease identi

Counter-party - Counter- party Right -of- use- asset

Dept Portfolio - entity (Lessor) External/Internal lessor (Lessor) ABN Contract no. Asset description category Address

A brief description of the specified asset in

the lease

Please select from the draw-
down list
If the lessor is a
department/entity controlled
Please fill in the by the State of Victoria, please
portfolio select "VPS
department if your department/entity";
entity is a portfolio Leave it blank Name of the otherwise, select "External
entity for departments lessor entity"
This column is for the
identification of the lease
contract, fill in the title of
the contract if it doesn't
ABN of the lessor have a reference no.
If there is an extension option and the lessess
is reasonably certain to exercise the option,
list the extension option information in a
separate row
If there is a termination option and the
lessess is reasonably certain to exercise the
option, list the extension option information This column only applies if
in a separate row but illustrate all dollar Please select from the the leased asset is land or
amounts as negative draw-down list buildings

1 DTF ABC company External entity 48 123 123 L1234 Office for Division XYZ Non-specialised buildings Level 20, 1 Spring Street, Me
2 DTF ABC company External entity 48 123 123 L1234 Office for Division XYZ - termination option to Non-specialised buildings Level 20, 1 Spring Street, Me

Total

Unclassified
e the option given the current moving plan and high rental in the extension period.
nd of the extension period.

Lease identification

Contract Remaining contract term after

Existing lease commencement the initial application date Extension option uncertain Termination option uncertain Remaining contract consideration
Low value asset Contract status classification date Contract expiry date (month) to exercise or not to exercise or not (nominal) ($)

Please describe the terms contract consideration for the

Only select "Y" if the
underlying asset's value is
below $5,000 when it's new
and not highly dependent
on, or interrelated with Please select from Please select from
other assets the draw-down list the draw-down list DD/MM/YYYY
N Active
N Active
and the rental in the Please describe the terms, contract term after the initial
extension period including the penalty application date, including lease
component and non-lease
If there is an extension If there is a termination option component
option and the lessess is and the lessess is reasonably
For contracts reasonably certain to certain to exercise the option, do Including fixed payments, variable
already started, put exercise the option, do not not include it here. Please list payments dependent on an index
the initial include it here. Please list the extension option information or a rate, residual value guarantee
application date the extension option in a new lease line (row) but and other reasonably certain
please fill in the number of information in a new lease illustrate all dollar amounts as payment, less lease incentive
DD/MM/YYYY months line (row) negative receivable
There is an option for DTF
to extend the contract for
another 5 years, with the
same annual rental increase
as in the previous 25 years
(cleaning service
component is still $5,000).
DTF does not have the
intention to exercise the
option given the current
moving plan and high rental
Operating lease 7/1/2019 6/30/2025 72.00 in the extension period. None 1,910,000
Operating lease 5/1/2025 6/30/2025 2.00 -57,500

1,852,500

Unclassified
 Non-lease components Lease component 1: for identified asset 1

Fair value of the right-

of-use asset for lease
Incremental borrowing rate at Consideration for non- component 1 at the Consideration for lease Cost of the right-of-use asset for lease
implicit interest rate initial application date Non-lease components lease components($) Lease component 1 initial application date component 1 (nominal) ($) component 1($)

This is the value of right-of use asset under

Total payments for the the modified retrospective option 2
identified underlying asset 1
after the initial application date For lease component 1: Lease liability using
total payments related the incremental interest rate at the initial
Use incremental borrowing rate at to the non-lease Including fixed payments, application date - accrued lease payment
the contract commencement date components (e.g. This is the value of variable payments dependent before the initial application date + prepaid
(not the initial application date) if service component) for right-of use asset under on an index or a rate, residual lease payment before the initial
the interest rate implicit in the the contract term after the full retrospective value guarantee and other application date + amortised carrying
lease can not be readily Description of the nature of non- the initial application Description of the and modified reasonably certain payment, amount of previously capitalised cost for
determined lease components date identified asset 1 retrospective option 1 less lease incentive receivable the operating lease

6% 5% Cleaning service 30,000 Office floor 690,432 1,880,000 1,730,880

6% 5% Cleaning service -833 Office floor -4,603 -56,667 -31,092

29,167 685,829 1,823,333 1,699,788

Unclassified
 Lease component 2: for identified asset 2

Lease liability for lease Lease liability for lease

component 1 using the Fair value of the right- component 2 using the
Lease liability for lease incremental interest of-use asset for lease Lease liability for lease incremental interest
component 1 using the rate at initial component 2 at the Consideration for lease Cost of the right-of-use asset for lease component 2 using the rate at initial
implicit interest rate ($) application date ($) Lease component 2 initial application date component 2 (nominal) ($) component 2($) implicit interest rate ($) application date ($) Lease component 3

Total payments for the This is the value of right-of use asset under
This is the value of lease identified underlying asset 2 the modified retrospective option 2 This is the value of lease
liability under the after the initial application liability under the
This is the value of lease modified retrospective date For lease component 2: Lease liability using This is the value of lease modified retrospective
liability under the full option 1 and 2 the incremental interest rate at the initial liability under the full option 1 and 2
retrospective option Including fixed payments, application date - accrued lease payment retrospective option
variable payments dependent before the initial application date + prepaid
NPV for the lease NPV for the lease on an index or a rate, residual lease payment before the initial NPV for the lease NPV for the lease
payment liabilities payment liabilities value guarantee and other application date + amortised carrying payment liabilities payment liabilities
related to the identified related to the identified Description of the reasonably certain payment, amount of previously capitalised cost for related to the identified related to the identified Description of the
underlying asset 1 underlying asset 1 identified asset 2 less lease incentive receivable the operating lease underlying asset 2 underlying asset 2 identified asset 3

1,135,987 1,661,213
-29,373 -31,092

1,106,614 1,630,121 - - - - - - -

Unclassified
 Lease component 3: for identified asset 3 Financial impact

Total financial liability

Fair value of the right- Lease liability for lease Total financial liability upon initial recognition
of-use asset for lease Consideration for lease Lease liability for lease component 3 using the Fair value of the right- Total cost of assets upon initial recognition using the incremental
component 3 at the component 3 (nominal) Cost of the right-of-use asset for component 3 using the incremental interest rate at of-use asset at the upon initial recognition using the implicit interest rate at initial
initial application date ($) lease component 3($) implicit interest rate ($) initial application date ($) initial application date ($) interest rate($) application date ($)

This is the value of right-of use asset

Total payments for the under the modified retrospective
identified underlying asset option 2
3 after the initial
application date For lease component 3: Lease
liability using the incremental
Including fixed payments, interest rate at the initial application This is the value of lease This is the value of lease
variable payments date - accrued lease payment before liability under the full liability under the modified
dependent on an index or a the initial application date + prepaid retrospective option retrospective option 1 and 2
rate, residual value lease payment before the initial
guarantee and other application date + amortised NPV for the lease
reasonably certain carrying amount of previously payment liabilities NPV for the lease payment
payment, less lease capitalised cost for the operating related to the identified liabilities related to the
incentive receivable lease underlying asset 3 identified underlying asset 3

690,432 1,730,880 1,135,987 1,661,213

-4,603 -31,092 -29,373 -31,092

- - - - - 685,829 1,699,788 1,106,614 1,630,121

Unclassified
 AASB 16 Guidance

What is the definition of a lease?

What is an identified asset?

What is the “right to control the use” of an asset?

What is a peppercorn lease?

What is an embedded lease?

What is recognised on the balance sheet?

How is a lease initially measured by lessees?

What does a lessee recognise in profit or loss?

What date is this standard effective?

Net present value
 AASB 16 Guidance
A lease is a contract (or part of a contract) that grants the right to use an asset for a
period of time in exchange for consideration.
A contract contains a lease if fulfilment of the contract depends on an identified
asset and the contract grants the right to control the use of that identified asset
throughout the period of use.
Each lease component should be identified and accounted for separately.
An asset is typically identified by being explicitly specified in a contract, but an asset
can also be identified by being implicitly specified at the time it is made available
for use by the customer.
A customer has the right to control the use of an asset if they have:
- the right to obtain substantially all of the economic benefits from the use of the
asset and
- the right to direct the use of the asset, i.e. to decide how and for what purpose it
is used
The lease payments do not reflect the fair value of the property being leased. i.e.
the consideration paid is significantly less than the fair value.
Under the new leasing standard, an asset should be recognised at fair value where
the consideration paid is less than fair value.
An embedded lease exists if there is an asset within a contract and the customer
controls use of the asset.
Lessees will recognise almost all leases on the balance sheet (as a “right-of-use
asset” and “lease liability”).
The lessee recognises:
- a lease liability at the present value of future lease payments; and
- a right-of-use asset to an equal amount plus initial direct costs.
A lessee will recognise:
- interest on the lease liability
- depreciation of the right of use asset
The new accounting standard is effective from 1 January 2019 for December
reporters for all new leases and pre-existing leases
Net present value of the future payments on the lease, including the
residual value. The net present value of a lease represents the minimum
lease payments. Minimum lease payments are the lowest amount that a
lessee can expect to make on a lease over its lifetime.