BLM52040 - Right-of-use assets: right-of-use asset lessees: the spreading rules: example 3
Entity听尝迟诲听entered into听a lease on 1 January 2012 for a period of 20 years. During 2017,听Entity Ltd听stopped using the asset but under the terms of the lease, they were unable to return the asset to the lessor.听 Entity Ltd recognised听an onerous lease provision in respect of its future rental payments.听
At听31 December 2018, the onerous lease provision was 拢750,000.听
On adoption of IFRS 16 in its accounts for the year ended 31 December 2019, Entity听尝迟诲 recognised听a right-of-use听asset and a lease liability in respect of the lease. On transition to IFRS 16,听Entity听Limited assessed the impairment of the right-of-use asset required under IAS 36 at the date of initial听application as 拢600,000 rather than using the practical expedient to adjust the right-of-use asset by the amount of the onerous lease provision.听
Without the onerous lease provision and impairment, the transitional accounting adjustment in respect of the lease would be a debit of 拢250,000.听
The reversal of the onerous lease provision of 拢750,000 and recognition of an impairment of 拢600,000, however, means that that the actual transitional accounting adjustment in respect of the lease is a debit of 拢100,000. It is this figure which should be used in the spreading calculation (see BLM52015).听
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