AC2101 – Accounting Recognition

and Measurement

Seminar 6
Lease Accounting III

Semester 1, AY2017/2018

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 Seminar 6 Agenda

- Team 1 Presentation
- Discussion of Imhoff et al. (1991)
- FRS 116 Transition Provisions

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 Group Presentation

- Team 1

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 Discussion on
Imhoff et al. (1991)

– Seminar Question 1

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4
ASC has released FRS 116, which will
supersede FRS 17. What is the accounting
treatment for lessees required under FRS 116?

1. Lessee should recognise leased assets if they are

material in relation to PPE, and any financial
obligation to make future lease payments
2. Lessee should recognise assets for operating leases,
and any financial obligation relating to finance leases
25% 25% 25% 25%
3. Lessee should recognise assets for finance leases,
and any financial obligation relating to operating
leases
4. Lessee should recognise, with limited exceptions,
lease assets, and any financial obligation to make
future lease payments
1. 2. 3. 4.

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FRS 116 Transition Provisions for
Lessee
Previous
assessment of
Approach Under FRS 116
lease under
FRS 17

Presentation and
Full Retrospective
disclosure based on
Approach
FRS 8

Operating Leases* Right of Use (ROU)

Asset: Equal to lease
liability, or as if
FRS 116 had always
been applied **
Modified Retrospective
Approach
Lease liability: Present
value of remaining
lease payments using
incremental borrowing
rate to discount

*: No major change for finance lease if the lease is already accounted as a finance lease
under FRS 17
**: Using incremental borrowing rate to discount

Copyright © Nanyang Business School Diagram adapted from BDO: IFRS 16 (2016)
FRS 116 Transition Provisions for
Sale and Leaseback (Lessee)
Previous
Under FRS 17 assessment of Under FRS 116
lease under FRS 17

1) Account via either

full or modified
retrospective
approach
Operating Lease
2) Adjust ROU asset
for any deferred
gain/loss related to
Sale and Leaseback off-market terms

No major accounting
Finance Lease
change

Copyright © Nanyang Business School Diagram adapted from BDO: IFRS 16 (2016)