IFRS 16 Leases

Accounting treatment for a 10 year lease on property.

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I have a client who paid £58000 cash upfront for a 10 year lease on property. After the 10 years they will release the property to the landlord.No additional monthly amounts are being paid.

Given the changes on accounting treatment for leases, how should I account for the above.

can anyone please help

thanks 

Rudo 

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By paul.benny
14th Apr 2021 11:35

This is a short leasehold property, so should be accounted for under IAS16. It's not a lease within the scope of IFRS16

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Replying to paul.benny:
John Toon
By John Toon
14th Apr 2021 12:32

The short term lease exemption under IFRS 16 is for leases of 12 months or less. This is a 10 year lease according to the OP, albeit seemingly paid up front, so have I missed something?

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Replying to johnt27:
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By paul.benny
14th Apr 2021 13:18

Lease accounting from SSAP21 onwards is based on the substance of the transaction, being purchase of an asset financed by a loan.

Here, we've bought an asset and paid for it in full on day 1 with no financing element and no further payments.

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