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Presentation and disclosure
Publication date: 17 Feb 2023
gx In depth INT2023-01
9. How is the lease liability presented in the statement of financial position?
Regardless of which approach is used to determine the lease liability in a sale and leaseback (see Questions 4 and 5 above), it is presented in the same line item as other lease liabilities in the statement of financial position. A lessee should either present the lease liability in the statement of financial position or disclose it in the notes separately from other liabilities. If the lessee does not present lease liabilities separately in the statement of financial position, it should disclose which line items in the statement of financial position include those liabilities.
To the extent that a sale and leaseback transaction gives rise to additional financing provided by the buyer-lessor to the seller-lessee (for example, where the sale proceeds are above market), this is recognised as a separate financial liability and not as a lease liability.
10. Are additional disclosures required in the financial statements?
The amendments do not require specific additional disclosures (unless they are early adopted – see Question 11 below) relating to sale and leaseback transactions. However, a seller-lessee applying the amendments should disclose material accounting policy information relating to the initial and subsequent measurement of lease payments and revised lease payments for sale and leaseback transactions. For more information on determining what is material accounting policy information, please see PwC’s Practice Aid on Accounting Policies Disclosures.
Entities should also consider the existing IFRS 16 disclosure requirements in the context of their sale and leaseback transactions. For example, IFRS 16 requires disclosure of the expense relating to variable lease payments that are not included in the measurement of lease liabilities. If variable lease payments have been included as lease payments that reduce the amount of the lease liability, only the excess variable payments recognised in profit or loss would be included in this disclosure (see Question 5 above). Any gains or losses on sale and leaseback transactions are required to be disclosed. IFRS 16 also requires qualitative and quantitative information that helps users to assess both sale and leaseback transactions and future cash outflows to which the lessee is potentially exposed that are not reflected in the measurement of lease liabilities. These disclosures should be specific to the terms and conditions of the sale and leaseback transactions entered into by the entity.
Prior to adoption of the amendments, entities should provide the relevant IAS 8 disclosures relating to the possible impact that application of the amendments will have on the entity’s financial statements in the period of initial application.
In the year of adoption of the amendments, disclosures might be required by IAS 8 to explain the change in accounting policy, including the transitional provisions, and the impact on the financial statements for both the current and prior periods.
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