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Company A sets up a company B that manages its building. That way it avoids depreciation


What are the IFRS implications. The company pays no rent to company B and assumes the accrued rental expense equals the expected dividend income

asked Jan 6 in IAS 16 - Property, Plant and Equipment by anonymous

1 Answer

0 votes
Is the transaction between Company A & B is Sale and lease back or lease arrangement?

We have to first determine if the arrangement contains lease or not. From the question it appears that we can treat the same as lease as for which it is impracticable to separate lease payment liability as the company A assumes the accrued rent expense same as dividend income.

Considering an operating lease, we can treat all payments under arrangement as lease payment that do not include payments for non lease elements. Terms for variable lease payment must be disclosed with other disclosure requirements of lease arrangement  in financial statement.
answered Jan 7 by Shivangi Level 4 Member (7,570 points)


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