Endorsement of Lease Liability in a Sale and Leaseback— Amendments to IFRS 16

Lease Liability in a Sale and Leaseback—Amendments to IFRS 16 (the Amendments), with an effective date of 1 January 2024 was approved for adoption by all members of the UK Endorsement Board on 11 May 2023.

A link to the Adoption Statement of the Amendments and the text of the Amendments can be found here.

The Amendments are not likely to lead to a significant change in accounting practice and do not meet the criteria for a post-implementation review under Regulation 11 in SI 2019/685.

Endorsement project

Background

The Amendments add subsequent measurement requirements for sale and leaseback transactions to improve the requirements for such transactions in IFRS 16 Leases as part of the IASB’s continuous effort to maintain and improve international accounting standards and to support their consistent application. 

The Amendments are narrow in scope and were issued and exposed for public comment as the IASB considered they merited consultation and outreach. 

The IASB’s proposals were set out in Exposure Draft ED/2020/4 Lease Liability in a Sale and Leaseback (the ED). The UKEB Secretariat submitted its Final Comment Letter (FCL) on the ED to the IASB on 26 March 2021 before the Board’s statutory functions had been delegated by the Secretary of State. The Board was therefore not involved in the work on the development of the FCL. However, the IASB considered the comments in the UKEB Secretariat FCL, and those made by UK respondents directly to the IASB, during its discussion of the stakeholder feedback on the ED.

UKEB Endorsement Criteria Assessment

On 5 January 2023 the UKEB published a [draft] Endorsement Criteria Assessment (DECA) on the Amendments. 

The public consultation period closed on 5 April 2023. Thank you to all stakeholders that provided feedback.

All responses received will bewere considered when finalising the ECA. The UKEB Final ECA was published on 16 May 2023. An accompanying Feedback Statement, describing how feedback received from stakeholders was addressed, was also published on the same date.

The following relevant documents are available at the foot of this page:

• Draft ECA and Invitation to Comment
• Responses from stakeholders
• Final ECA
• Feedback Statement

UKEB meetings

The Amendments were discussed in the following UKEB Board meetings.

• 23 September 2022: Project Update (Forthcoming Amendment to IFRS 16 Leases)
• 17 November 2022: Approval of Project Initiation Plan 
• 14 December 2022: Approval of Draft Endorsement Criteria Assessment 
• 27 April 2023: Adoption Package

Description of the Amendments

The Amendments add requirements explaining how a seller-lessee subsequently accounts for sale and leaseback transactions with variable lease payments that do not depend on an index or rate. 

In particular, the Amendments require a seller-lessee to subsequently measure such leaseback liabilities in a way that it does not recognise any amount of the gain or loss that relates to the right of use it retains. The new requirements do not prevent a seller-lessee from recognising in profit or loss any gain or loss relating to the partial or full termination of a lease.

The Amendments include a new example (Example 25 of IFRS 16) illustrating the application of the requirements in paragraph 102A (the Amendments) and in paragraphs 29–46 of IFRS 16 to a sale and leaseback transaction with variable lease payments that do not depend on an index or rate. The Amendments also amend existing Illustrative Example 24 of IFRS 16. 

The Amendments are effective for annual periods beginning on or after 1 January 2024, with early application permitted.