need to know / leases - project update - BDO International

LEASES - A PROJECT UPDATE
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Presentation
A lessee’s presentation of amounts arising from leased assets would depend on whether the lease(s) are to be accounted for
under the finance or straight line approaches.
For those leases accounted for under the finance approach, the lessee would:
1. Present the right-of-use asset on the same basis as if the underlying asset were owned.
2. For right-of-use assets and lease liabilities included in the statement of financial position, either disclose amounts relating
to leases as separate line items, or include those amounts in primary statement line items that contain other items and
disclose the right-of-use assets and lease liabilities in the notes to the financial statements. If right-of-use assets and lease
liabilities are not presented in separate line items in the statement of financial position, the note disclosures would be
required to indicate the line item in the statement of financial position in which the right-of-use assets and lease liabilities
have been included.
3. Present separately in the statement of comprehensive income, or disclose separately in the notes, (total) interest expense
and the component of interest paid relating to leases.
4. Recognise interest expense and the amortisation expense associated with the right-of-use asset separately in the
statement of comprehensive income. This means that combining interest expense and amortisation expense in the
statement of comprehensive income, and presenting this as a single amount of lease or rent expense, would be prohibited.
5. Present lease payments in the cash flow statement in the following way:
a. Lease payments relating to principal within financing activities.
b. Lease payments relating to interest in accordance with IAS 7 Statement of Cash Flows. This will depend on the
accounting treatment of the interest amounts; interest expense will fall within the scope of IAS 23 Borrowing Costs
when determining amounts that could be capitalised, which could affect the cash flow classification.
c. Variable lease payments not included in the measurement of the lease liability within operating activities.
For those leases accounted for under the straight line approach, the lessee would:
1. Present the right-of-use asset on the same basis as if the underlying asset were owned.
2. Present interest expense and amortisation expense in the statement of comprehensive income as one single line item.
3. Present lease payments as operating activities in the cash flow statement.