EFRAG publishes its Final Comment Letter on IASB’s Exposure Draft ED ED/2020/4 Lease Liability in a Sale and Leaseback
16 April 2021
In November 2020, the IASB issued Exposure Draft ED/2020/4 Lease Liability in a Sale and Leaseback, proposing amendments to IFRS 16 Leases. The Exposure Draft specified the initial and subsequent measurement of lease liability arising in a sale and leaseback transaction.
EFRAG has published its Final Comment Letter on the Exposure Draft. EFRAG has expressed a view that the Exposure Draft provides evidence of the existence of a broader conflict of principles in IFRS 16 regarding the accounting for sale and leaseback and the definition of lease payments. Therefore, EFRAG has urged the IASB to consider the matter more broadly and possibly as part of the future Post Implementation Review of IFRS 16 or the IASB’s project on Variable Consideration.
EFRAG has also suggested to the IASB to consider a simplified solution by recognising the profit attributable to the retained interest in the right-of-use asset as a non-lease liability or deferred income rather than a lease liability.
The Final Comment Letter may be accessed here.