CERTYNEX IFRS ACADEMY

Calyse carried out a sale and leaseback of a store that qualified as a sale; part of the leaseback payments varies with the store's revenue. A year later, revenue falls and the controller proposes to reduce the lease liability for the now lower variable portion, recognising a gain in profit or loss on the right of use retained. Part of the store is also subject to a partial termination negotiated with the lessor. Which analysis complies with IFRS 16?

The proposal is correct: any decrease in variable lease payments gives rise to a gain in profit or loss on the right of use retained.

After the commencement date, the seller-lessee no longer applies any subsequent measurement rule: the lease liability remains frozen.

Calyse applies the subsequent measurement requirements to the right-of-use asset and the lease liability, determining the lease payments so as to recognise no gain or loss on the right retained, which does not prevent it from recognising the gain or loss on the partial termination.

No gain or loss can be recognised, even on the partial termination, while the leaseback is ongoing.