Disclosures by the lessor

Learning objectives

• Prepare the lessor's disclosures: selling profit or loss, finance income, variable lease income, operating lease income, maturity analyses of lease payments receivable and reconciliation with the net investment, management of the risk associated with rights retained in the underlying asset.L2, L3, L4

Normative references

• IFRS 16 §89The information disclosed by the lessor in the notes, together with that in the primary financial statements, should give users a basis to assess the effect of leases on its financial position, financial performance and cash flows. Paragraphs 90 to 97 set out the corresponding requirements.
• IFRS 16 §90The lessor discloses for the period: for finance leases, selling profit or loss, finance income on the net investment and income relating to variable lease payments not included in the net investment; for operating leases, lease income, separately disclosing income relating to variable lease payments that do not depend on an index or a rate.
• IFRS 16 §91The disclosures in paragraph 90 are provided in a tabular format, unless another format is more appropriate.
• IFRS 16 §92The lessor discloses additional qualitative and quantitative information necessary to meet the objective in paragraph 89, in particular about the nature of its leasing activities and how it manages the risk associated with any rights it retains in underlying assets, including any means by which it reduces that risk (buy-back agreements, residual value guarantees, variable lease payments for use in excess of specified limits).
• IFRS 16 §93The lessor provides a qualitative and quantitative explanation of the significant changes in the carrying amount of the net investment in finance leases.
• IFRS 16 §94The lessor discloses a maturity analysis of the lease payments receivable, showing the undiscounted payments to be received on an annual basis for a minimum of each of the first five years and a total for the remaining years. It reconciles the undiscounted payments to the net investment, identifying the unearned finance income and the discounted unguaranteed residual value.
• IFRS 16 §95For items of property, plant and equipment subject to an operating lease, the lessor applies the disclosure requirements of IAS 16, disaggregating each class between assets subject to operating leases and assets not subject to operating leases; disclosures for leased assets are thus provided by class separately from those for owned assets held and used by the lessor.
• IFRS 16 §96The lessor applies the disclosure requirements of IAS 36, IAS 38, IAS 40 and IAS 41 to assets subject to operating leases.
• IFRS 16 §97The lessor discloses a maturity analysis of operating lease payments, showing the undiscounted lease payments to be received on an annual basis for a minimum of each of the first five years and a total for the remaining years.

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

13 questions

• For its finance leases, which amounts for the period must a lessor disclose under para. 90 of IFRS 16? (several answers)L2
• Clairval, a lifting equipment rental company, only enters into operating leases of cranes accounted for under IAS 16. Which disclosures must it provide? (several answers)L2
• The head of consolidation at Bastidane is preparing the note on lease income for the period (selling profit, finance income, lease income). She wonders in which format to present this information. What does IFRS 16 require?L2
• For its note on finance leases, Ardenne Crédit has the following data at the reporting date: undiscounted lease payments to be received 500,000; unearned finance income relating to those payments 80,000; discounted unguaranteed residual value 30,000. What net investment amount must the reconciliation show?L3
• Ligeria's finance leases generate payments to be received until 20X9, that is over eight years after the reporting date. Which maturity analysis of these payments meets the minimum required by IFRS 16?L3
• Beyond the figures, which additional qualitative and quantitative information does IFRS 16 mention as possibly necessary for a lessor? (several answers)L3
• During the year, Hélion Finance's net investment in its finance leases increased from 2,000,000 to 3,500,000, following the purchase of a portfolio of leases and several early terminations. What specific disclosure does IFRS 16 require in this respect?L3
• The Corbières group uses some of its forklift trucks itself and leases out the others under operating leases; it also holds investment property that is leased out. Which statements about its disclosures are correct? (several answers)L3
• Aérolia, a lessor of regional aircraft under operating leases, provides all the figures required of lessors. However, most of its fleet consists of a single model whose resale value at the end of the leases is highly uncertain, and Aérolia hedges this risk through residual value guarantees negotiated case by case. The finance director considers that the standard's list of disclosures is exhaustive and that nothing needs to be added. Which position do you defend?L4
• Reviewing Valdrôme's note on finance leases, you find that it presents, by year, the payments receivable discounted at the implicit rate, whose total equals the net investment in the statement of financial position. No other table is provided. What correction do you require?L4
• The Méridienne Équipements group is a lessor of both finance leases (industrial equipment) and operating leases (commercial vehicles). You are preparing the checklist of its disclosures. Which items does it include? (several answers)L4
• At the reporting date, Pélisse has a single operating lease, of a retail unit, which still runs for eight years at a fixed payment of 10,000 a year, payable at the beginning of each year. Which maturity analysis of undiscounted lease payments to be received meets the minimum required?L2
• The property company Rivelune leases out shops under operating leases. Each lease payment has a fixed part indexed annually to a price index and a part equal to a percentage of the lessee's sales above a threshold. In the note on lease income, which income must Rivelune disclose separately?L3