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IFRS 16Workpapers (Step 4 of 5)

Workpaper assignment

Step 4 of 5
Mission · workpaperWorkpaper · IFRS 16L4 · Expert

Documents

Deed of sale and lease agreement

Contract

Deed of sale and lease agreement

Deed of sale and lease agreement of 1 January 20X1: Valtera sells to Foncière Orsane the building of its head office (land and construction) for a price of 10,000,000, paid in cash on the day of the transfer, and leases it back for a period of 3 years, from 1 January 20X1 to 31 December 20X3. Fixed annual payment of 1,200,000, payable in arrears on 31 December of each year (20X1, 20X2 and 20X3). The agreement contains no purchase option, no extension option and no right for Valtera to repurchase the building.

Sale and leaseback transaction for the seller-lessee

Sale and leaseback of the head office and disclosures by the seller-lessee

6 documents9 sections to document
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Guided mode

Section 1 of 9

Objective

In progress
Section brief
What to document
The engagement, its scope and the working mode chosen.
Why
A workpaper answers one precise question: framing it avoids off-topic work.
How
Read the objective and the assignment, then choose the mode (guided, semi-guided, professional).
Expected result
You know which question the workpaper must settle, and for which reporting date.
Your role
Preparer of the IFRS 16 workpaper
Level
Expert
Estimated time
≈ 50 min
Progress
0 / 5 steps done (review excluded)

Context

Valtera SA (a fictitious entity), an industrial group, owns its head office. To finance a new campus whose delivery is planned for early 20X4, it sells the building on 1 January 20X1 to Foncière Orsane (a fictitious entity) and leases it back until its relocation. You are preparing, for the consolidated financial statements for the year ended 31 December 20X1, the accounting for the transaction by Valtera, the seller-lessee, and the note on its leases.

Assignment

Workpaper Sale and leaseback transaction.

Purpose of the workpaper

Determine whether the transaction is a sale and leaseback and whether the transfer is a sale under IFRS 15; if so, adjust for off-market terms, measure the lease liability of the leaseback, the right-of-use asset retained and only the gain relating to the rights transferred; otherwise, recognise a financial liability. Record the corresponding entry.

Questions of the file covered by this workpaper

  • Is the transaction a sale and leaseback transaction and is the transfer a sale?
  • Calculate the lease liability at 1 January 20X1.
  • Calculate the right of use retained and the gain to be recognised on the rights transferred.
  • Which entry do you record at 1 January 20X1?

Documents in the file

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