Disclosures by the lessee

Learning objectives

• Prepare the lessee's quantitative disclosures: depreciation by class, interest, expenses relating to exempt leases and variable payments, sublease income, cash outflows, additions to right-of-use assets, gains or losses on sale and leaseback, carrying amounts by class, maturity analysis of lease liabilities.L2, L3
• Assess the additional qualitative information needed (variable payments, options, guarantees, leases not yet commenced).L3, L4

Normative references

• IFRS 16 §51The information disclosed by the lessee in the notes, together with the information in the statement of financial position, the statement of profit or loss and the statement of cash flows, should give users a basis to assess the effect of leases on its financial position, financial performance and cash flows. Paragraphs 52 to 60 set out requirements to meet this objective.
• IFRS 16 §52The lessee discloses information about its leases in a single note or separate section in its financial statements. It need not duplicate information already presented elsewhere, provided that it is incorporated by cross-reference in that note or section.
• IFRS 16 §53The lessee discloses for the period: depreciation of right-of-use assets by class of underlying asset; interest expense on lease liabilities; the expense relating to short-term leases (which may exclude leases of one month or less); the expense relating to leases of low-value assets (excluding short-term leases already included); the expense relating to variable lease payments not included in lease liabilities; income from subleasing right-of-use assets; total cash outflow for leases; additions to right-of-use assets; gains or losses arising from sale and leaseback transactions; the carrying amount of right-of-use assets at the end of the period by class.
• IFRS 16 §54The disclosures in paragraph 53 are provided in a tabular format, unless another format is more appropriate. The amounts disclosed include costs that the lessee has included in the carrying amount of another asset during the period.
• IFRS 16 §55The lessee discloses the amount of its lease commitments for short-term leases accounted for under paragraph 6 if the portfolio of short-term leases to which it is committed at the end of the period is dissimilar to the portfolio to which the short-term lease expense disclosed under paragraph 53(c) relates.
• IFRS 16 §56If right-of-use assets meet the definition of investment property, the lessee applies the disclosure requirements in IAS 40; it is then not required to provide, for those assets, the disclosures in paragraphs 53(a), (f), (h) and (j).
• IFRS 16 §57If a lessee measures right-of-use assets at revalued amounts applying IAS 16, it discloses for those assets the information required by paragraph 77 of IAS 16.
• IFRS 16 §58The lessee discloses a maturity analysis of lease liabilities applying paragraphs 39 and B11 of IFRS 7 separately from the maturity analyses of other financial liabilities.
• IFRS 16 §59The lessee discloses additional qualitative and quantitative information necessary to meet the objective in paragraph 51, for example about the nature of its leasing activities, future cash outflows not reflected in the lease liability (variable lease payments, extension or termination options, residual value guarantees, leases not yet commenced to which it is committed), restrictions or covenants imposed by leases, and sale and leaseback transactions. Paragraph B48 provides additional guidance.
• IFRS 16 §60A lessee that accounts for short-term leases or leases of low-value assets applying paragraph 6 discloses that fact.
• IFRS 16 §60AA lessee that applies the practical expedient in paragraph 46A discloses whether it has applied it to all rent concessions that meet the conditions in paragraph 46B or, if not, the nature of the contracts to which it has applied it, and the amount recognised in profit or loss to reflect changes in lease payments arising from rent concessions to which it has applied the expedient.
• IFRS 16 §B48In deciding whether additional information about leasing activities is necessary to meet the disclosure objective in paragraph 51, the lessee considers whether that information is relevant to users and whether it is already apparent from the primary financial statements or the notes.
• IFRS 16 §B49Additional information about variable lease payments might include the reasons for using them and their prevalence, their relative magnitude compared with fixed payments, key variables on which they depend and how payments are expected to vary in response to changes in those key variables, and their other operational and financial effects.
• IFRS 16Additional information about extension or termination options might include the reasons for using them and their prevalence, the relative magnitude of optional lease payments compared with lease payments, the prevalence of the exercise of options not included in lease liabilities, and their other operational and financial effects.
• IFRS 16 §B51Additional information about residual value guarantees might include the reasons for providing them and their prevalence, the magnitude of the lessee's exposure to residual value risk, the nature of the underlying assets concerned and their other operational and financial effects.
• IFRS 16 §B52Additional information about sale and leaseback transactions might include the reasons for them, their key terms and conditions, payments not included in the measurement of lease liabilities and their cash flow effect.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

16 questions

• Historical reminder. In 2020, the lessee Tamaris obtained a rent concession that met all the conditions of the practical expedient for Covid-19-related rent concessions, and it elected to apply it. Which description of this expedient is accurate?L3
• Mélèze is preparing the note on its leases as a lessee. Which of the following amounts must it disclose for the period? (several answers)L2
• The Aubépine group is restructuring the notes to its financial statements. Which statements on the organisation and objective of lessee disclosures are accurate? (several answers)L2
• The consolidation manager of the Tilleul group proposes presenting the quantitative amounts relating to leases (depreciation, interest, expenses for exempt leases, cash outflows…) as a long narrative paragraph. What does IFRS 16 say?L2
• Fougère leases its production lines (a single class of underlying asset). In 20X4, depreciation of the related right-of-use assets amounts to 96,000: 84,000 is recognised as an expense and 12,000 has been included in the production cost of inventories still on hand at the reporting date. What depreciation amount does Fougère disclose for this class in the lease note?L3
• The Romarin firm applies the exemptions for short-term leases and leases of low-value assets. In 20X5, the short-term lease expense is 30,000, of which 4,000 relates to short-term leases of low-value assets. The total expense for leases of low-value assets reaches 26,000, including those 4,000. What amount does Romarin disclose as the expense relating to leases of low-value assets?L3
• The civil engineering company Garance accounts for its site crane leases under the short-term lease exemption. The expense for the year relates to cranes returned during the year; in December, Garance signed new short-term leases for another site, which commit it for several months of the following year. What additional information must it disclose?L3
• Hysope holds, as lessee, a right-of-use asset over a shopping centre that it subleases; according to the analysis provided, this right meets the definition of investment property. What information does Hysope disclose for this right-of-use asset?L3
• The hotel group Verveine measures its owned hotels under the IAS 16 revaluation model and, according to the case data, also measures under that model the right-of-use assets over the hotels it leases. What information must it disclose for these revalued right-of-use assets?L3
• Valériane is preparing the maturity analysis of its lease liabilities. Which statements are accurate? (several answers)L3
• Capucine recognises as an expense the payments for its short-term leases and its leases of low-value assets, under the simplified treatment provided by IFRS 16. Which statements on its disclosure obligations are accurate? (several answers)L3
• The clothing retailer Iris leases 140 stores. For most of them, the rent includes a fixed part and a variable part equal to a percentage of the store's sales; the variable part, not included in the lease liability, represents almost half of the payments made. The current note is limited to the mandatory amounts. Write a recommendation to the CFO on the additional qualitative and quantitative information to be considered.L4
• The food group Mimosa leases its fleet of 600 trucks while guaranteeing the lessor a minimum residual value; the fall in the second-hand market increases its exposure. It also signed in November 20X5 a ten-year lease for a new warehouse, whose commencement date is set for March 20X6. Prepare, for the audit committee, a reasoned list of the additional information to be disclosed in the lease note at 31 December 20X5.L4
• In 20X4, the Camélia group completed a sale and leaseback transaction on its head office (according to the case data, the transfer is a sale) and recognised a gain in profit or loss. The payments include a significant variable part not included in the lease liability. Which approach to disclosures is most appropriate?L4
• Historical reminder. In its 2021 financial statements, the lessee Glycine applied the practical expedient for Covid-19-related rent concessions (applicable only to payments originally due on or before 30 June 2022). What information did it have to disclose in this respect? (several answers)L3
• The CFO of the Lavande group wishes to add to the lease note two pages describing each significant lease, several items of which already appear in the statement of cash flows and in the note on financial liabilities. The auditor considers this addition of limited use as it stands. Write a reasoned analysis explaining how Lavande should decide which additional information to provide and where to place it.L4