Lessee Contract Posting Steps:
The postings for IFRS 16 usually follow the same pattern, whether it is an office rental, a car lease, or something else.
Posting Steps - Standard Schema
|
Sr.No. |
Name |
Description |
Posting |
Point in time |
|
1 |
Initial Right of Use Asset and Lease Liability |
The value of the initial Right of Use Asset is the 'present
value' of all lease payments during the contract term. A lease payment is a
payment that is directly related with the transfer of the leased asset.
Payments that are related to other components like services are not
classified as lease payments. |
Right of Use Asset to Lease Liability |
Contract inception |
|
2 |
Decrease of the Lease Liability |
The Lease Liability gets decreased based on the payments during
the contract term. Value and point in time are based on the payment itself
without considering potential accruals. |
Lease Liability to Cash / Lease Expense |
Per Payment |
|
3 |
Interest Expense Posting |
The difference between the sum of all payments and the present
value (the initial Lease Liability/Right of Use Asset) is the Interest
Expense. The Interest Expense is increasing the Lease Liability each month. |
Interest Expense to Lease Liability |
Per Period |
|
4 |
Right of Use Asset Depreciation |
The Right of Use Asset is getting depreciated linearly in most
cases. Every month has the same depreciation as long as there is no contract
modification. |
Depreciation to Right of Use Asset |
Per Period |
|
Contract data |
||
|
Contract term in years |
|
3 |
|
Lease payments per year (prepayment) |
|
10,000.00 € |
|
Discount rate |
|
3.00% |
|
Calculation* |
|
|
|
||
|
Present Value at the beginning of the first
year |
|
29,134.70 € |
|
|
|
|
Present Value at the beginning of the second
year |
|
19,708.74 € |
|
|
|
|
Present Value at the beginning of the third
year |
|
10,000.00 € |
|
|
|
|
*The used PV formula
is usually only suitable for annual present value calculations. |
|||||
|
Postings in Year 1 |
||
|
Posting Step |
||
|
1 |
Initial Right of Use Asset and Lease Liability |
|
|
2 |
Decrease of the Lease Liability |
|
|
3 |
Interest Expense Posting |
|
|
4 |
Right of Use Asset Depreciation |
|
|
Right of Use Asset |
|
|
Debit |
Credit |
|
29,134.70 € |
0.00 € |
|
0.00 € |
0.00 € |
|
0.00 € |
0.00 € |
|
0.00 € |
9,711.57 € |
|
Right of Use Asset
Depreciation |
|
|
Debit |
Credit |
|
0.00 € |
0.00 € |
|
0.00 € |
0.00 € |
|
0.00 € |
0.00 € |
|
9,711.57 € |
0.00 € |
|
Lease Liability |
|
|
Debit |
Credit |
|
0.00 € |
29,134.70 € |
|
10,000.00 € |
0.00 € |
|
0.00 € |
574.04 € |
|
0.00 € |
0.00 € |
|
Interest Expense |
|
|
Debit |
Credit |
|
0.00 € |
0.00 € |
|
0.00 € |
0.00 € |
|
574.04 € |
0.00 € |
|
0.00 € |
0.00 € |
|
Cash or Lease Expense |
|
|
Debit |
Credit |
|
0.00 € |
0.00 € |
|
0.00 € |
10,000.00 € |
|
0.00 € |
0.00 € |
|
0.00 € |
0.00 € |
|
Postings in Year 2 |
||
|
Posting Step |
||
|
2 |
Decrease of the Lease Liability |
|
|
3 |
Interest Expense Posting |
|
|
4 |
Right of Use Asset Depreciation |
|
|
Right of Use Asset |
|
|
Debit |
Credit |
|
0.00 € |
0.00 € |
|
0.00 € |
0.00 € |
|
0.00 € |
9,711.57 € |
|
Right of Use Asset
Depreciation |
|
|
Debit |
Credit |
|
0.00 € |
0.00 € |
|
0.00 € |
0.00 € |
|
9,711.57 € |
0.00 € |
|
Lease Liability |
|
|
Debit |
Credit |
|
10,000.00 € |
0.00 € |
|
0.00 € |
291.26 € |
|
0.00 € |
0.00 € |
|
Interest Expense |
|
|
Debit |
Credit |
|
0.00 € |
0.00 € |
|
291.26 € |
0.00 € |
|
0.00 € |
0.00 € |
|
|
|
|
|
Cash or Lease Expense |
||
|
Debit |
Credit |
|
|
0.00 € |
10,000.00 € |
|
|
0.00 € |
0.00 € |
|
|
0.00 € |
0.00 € |
|
|
Postings in Year 3 |
||
|
Posting Step |
||
|
2 |
Decrease of the Lease Liability |
|
|
3 |
Interest Expense Posting |
|
|
4 |
Right of Use Asset Depreciation |
|
|
Right of Use Asset |
|
|
Debit |
Credit |
|
0.00 € |
0.00 € |
|
0.00 € |
0.00 € |
|
0.00 € |
9,711.57 € |
|
Right of Use Asset
Depreciation |
|
|
Debit |
Credit |
|
0.00 € |
0.00 € |
|
0.00 € |
0.00 € |
|
9,711.57 € |
0.00 € |
|
Lease Liability |
|
|
Debit |
Credit |
|
10,000.00 € |
0.00 € |
|
0.00 € |
0.00 € |
|
0.00 € |
0.00 € |
|
Interest Expense |
|
|
Debit |
Credit |
|
0.00 € |
0.00 € |
|
0.00 € |
0.00 € |
|
0.00 € |
0.00 € |
|
Cash or Lease Expense |
|
|
Debit |
Credit |
|
0.00 € |
10,000.00 € |
|
0.00 € |
0.00 € |
|
0.00 € |
0.00 € |
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