EFRAG publishes Draft Comment Letter on IASB’s Exposure Draft on Lease Liability in a Sale and Leaseback
08 January 2021
On 27 November 2020, the IASB issued Exposure Draft ED/2020/4 Lease Liability in a Sale and Leaseback (the ED), which proposed certain amendments to IFRS 16. The proposed amendments elaborate the accounting to be followed in case of sale and leaseback transactions.
EFRAG has published its Draft Comment Letter (the DCL) in response to the ED.
In the DCL, EFRAG has supported the proposals in the ED as they provide guidance on an area not currently addressed by IFRS 16. However, EFRAG has also commented that there may be a broader issue to consider by the IASB because of a conflict in the principles in IFRS 16 regarding the exclusion of variable payments (not based on an index or rate) from the definition of lease payments, and the principle that a gain arising on the interest retained by the seller-lessee in a sale and leaseback transaction cannot be recognised. EFRAG has further suggested that the IASB consider additional disclosures regarding the judgement applied in estimating the future payments.
The DCL may be accessed here. EFRAG has requested comments on the DCL by 22 February 2021.
The ED may be accessed here.