International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards
Page 332
The following table provides a breakdown of these amounts:
millions of €
Minimum lease payments
Interest component
Present values
Of which:
Of which:
Of which:
sale and
sale and
sale and
Total
leaseback Total
leaseback Total
leaseback
Dec.
31,
2016
MATURITY
Within
1
year
711 102 126 38 585 64
In 1 to 3 years
1,067
183
190
58
877
125
In 3 to 5 years
528
73
130
43
398
30
After
5
years
948 304 261 116 687 188
3,254 662 707 255
2,547 407
Dec. 31, 2015
MATURITY
Within
1
year
425 103 114 42 311 61
In 1 to 3 years
774
198
253
69
521
129
In 3 to 5 years
422
126
65
48
357
78
After
5
years
1,052 333 314 136 738 197
2,673 760 746 295
1,927 465
In addition, the leased asset is accounted for as property, plant and equipment, an
intangible asset or other asset of the reporting entity and the requirements for disclosure
in accordance with IAS 16 (Chapter 18), IAS 36 (Chapter 20), IAS 38 (Chapter 17),
IAS 40 (Chapter 19) and IAS 41 (Chapter 38) are applicable, as appropriate. [IAS 17.32].
9.2.2
Disclosure of operating leases
In addition to meeting the requirements of IFRS 7, lessees must make the following
disclosures for operating leases: [IAS 17.35]
(a) the total of future minimum lease payments under non-cancellable operating
leases for each of the following periods:
(i) not later than one year;
(ii) later than one year and not later than five years;
(iii) later than five years.
1680 Chapter 23
(b) the total of future minimum sublease payments expected to be received under
non-cancellable subleases at the reporting date;
(c) lease and sublease payments recognised as an expense in the period, with separate
amounts for minimum lease payments, contingent rents, and sublease payments.
See 3.4.7.A above for a discussion about the meaning for disclosure purposes of
future minimum lease payments and contingent rents;
(d) a general description of the lessee’s significant leasing arrangements including, but
not limited to, the following:
(i) the basis on which contingent rent payable is determined;
(ii) the existence and terms of renewal or purchase options and escalation
clauses; and
(iii) restrictions imposed by lease arrangements, such as those concerning
dividends, additional debt and further leasing.
An example of the disclosures made by a lessee in respect of their obligations under
operating leases is as follows.
Extract 23.5: Deutsche Telekom AG (2016)
Notes to the Consolidated Financial Statements [extract]
Other disclosures [extract]
33 LEASES
[extract]
DEUTSCHE TELEKOM AS LESSEE [extract]
Operating leases. Beneficial ownership of a lease is attributed to the lessor if this is the party to which all the
substantial risks and rewards incidental to ownership of the asset are transferred. The lessor recognizes the leased
asset in its statement of financial position. Deutsche Telekom recognizes the lease payments made during the term of
the operating lease in profit or loss. Deutsche Telekom’s obligations arising from operating leases are mainly related
to long-term rental or lease agreements for cell sites, network infrastructure, and real estate.
Some leases include extension options and provide for stepped rents. Most of these leases relate to cell sites in the
United States.
The operating lease expenses recognized in profit or loss amounted to EUR 3.9 billion in the 2016 financial year
(2015: EUR 3.2 billion; 2014: EUR 3.3 billion). The following table provides a breakdown of future obligations
arising from operating leases that are deemed to be reasonably certain:
millions of €
Dec. 31, 2016
Dec. 31, 2015
MATURITY
Within 1 year
3,486
3,322
In 1 to 3 years
5,493
5,650
In 3 to 5 years
3,799
4,548
After 5 years
3,749
7,822
16,527 21,342
Leases (IAS 17) 1681
9.3 Disclosure
by
lessors
9.3.1
Disclosure of finance leases
In addition to meeting the requirements in IFRS 7 (see 9.1 above), lessors must disclose
the following for finance leases:
(a) a reconciliation between the gross investment in the lease at the reporting date,
and the present value of minimum lease payments receivable at the reporting date.
In addition, an entity shall disclose the gross investment in the lease and the
present value of minimum lease payments receivable at the reporting date, for
each of the following periods:
(i) not later than one year;
(ii) later than one year and not later than five years;
(iii) later than five years;
(b) unearned
finance
income;
(c) the
unguaranteed
residual values accruing to the benefit of the lessor;
(d) the accumulated allowance for uncollectible minimum lease payments receivable;
(e) contingent rents recognised as income in the period; and
(f) a general description of the lessor’s material leasing arrangements. [IAS 17.47].
IAS 17 also recommends but does not require disclosure of the gross investment less
unearned income in new business added during the period, after deducting the relevant
amounts for cancelled leases as a useful indicator of growth. [IAS 17.48].
Deutsche Telekom discloses its activities as a finance lessor as follows:
Extract 23.6: Deutsche Telekom AG (2016)
Notes to the Consolidated Financial Statements [extract]
Other disclosures [extract]
33 LEASES [extract]
DEUTSCHE TELEKOM AS LESSOR [extract]
Finance Leases. Deutsche Telekom is a lessor in connection with finance leases. Essentially, these relate to the leasing of routers and other hardware, which Deutsche Telekom provides to its customers for data and telephone network solutions.
Deutsche Telekom recognizes a receivable in the amount of the net investment in the lease. The lease payments made by
the lessees are split into an interest component and a principal component using the effective interest method. The lease receivable is reduced by the principal received. The interest component of the payments is recognized as finan
ce income
in the income statement. The following table shows how the amount of the net investment in a finance lease is determined: millions of €
Dec. 31, 2016
Dec. 31, 2015
Minimum lease payments
190
219
Unguaranteed residual value
3
5
Gross investment
193
224
Unearned finance income
(11)
(14)
NET INVESTMENT
(PRESENT VALUE OF THE MINIMUM LEASE PAYMENTS)
182
210
1682 Chapter 23
The following table presents the gross investment amounts and the present value of payable minimum lease payments:
millions of €
Dec. 31, 2016
Dec. 31, 2015
Present value of
Present value of
Gross
minimum lease
Gross
minimum lease
investment
payments
investment
payments
MATURITY
Within 1 year
91
87
94
86
In 1 to 3 years
86
80
116
110
In 3 to 5 years
14
13
12
12
After 5 years
2
2
2
2
193 182 224 210
9.3.2
Disclosure of operating leases
Lessors must, in addition to meeting the requirements of IFRS 7 (Chapter 50), disclose
the following for operating leases:
(a) the future minimum lease payments under non-cancellable operating leases in the
aggregate and for each of the following periods:
(i) not later than one year;
(ii) later than one year and not later than five years;
(iii) later than five years;
(b) total contingent rents recognised as income in the period; and
(c) a general description of the lessor’s leasing arrangements. [IAS 17.56].
Depending on facts and circumstances, additional disclosures can be necessary that
would improve users’ understanding of the lessor’s operating leases (e.g. disclosures
required by IAS 37 on contingent liabilities arising from lease transactions).
Deutsche Telekom’s lessor interests in operating leases are disclosed as follows.
Extract 23.7: Deutsche Telekom AG (2016)
Notes to the Consolidated Financial Statements [extract]
Other disclosures [extract]
33 LEASES [extract]
DEUTSCHE TELEKOM AS LESSOR [extract]
Operating leases. If Deutsche Telekom is a lessor in connection with operating leases, it continues to recognize the
leased assets in its statement of financial position. The lease payments received are recognized in profit or loss. The
leases mainly relate to the rental of cell sites, building space, and terminal equipment, and have an average term of
10 years. The future minimum lease payments arising from non-cancelable operating leases are as follows:
millions of €
Dec. 31, 2016
Dec. 31, 2015
MATURITY
Within 1 year
1,006
1,184
In 1 to 3 years
477
728
In 3 to 5 years
321
339
After 5 years
496
485
2,300 2,736
Leases (IAS 17) 1683
In addition, the leased asset is accounted for as a fixed asset of the reporting entity and
the requirements for disclosure in accordance with IAS 16 (Chapter 18), IAS 36
(Chapter 20), IAS 38 (Chapter 17), IAS 40 (Chapter 19) and IAS 41 (Chapter 38) are
applicable, as appropriate. [IAS 17.57].
References
1
IFRIC Update, July 2016.
8 RICS Valuation – Professional Standards UK
2 ASC 840 is superseded by ASC 842, with the
January 2014 (revised April 2015), p.130.
effective date depending on the type of entity.
9 RICS Valuation – Professional Standards UK
Although ASC 842 does not require the use of
January 2014 (revised April 2015), p.130.
bright-lines for lease classification in the same
10 IFRIC Update, November 2005.
way as ASC 840, the implementation 11 IFRIC Update, March 2007.
guidance in ASC 842-10-55 states that a 12 IAS 18 is superseded by IFRS 15, effective for
reasonable approach to applying the lease
reporting periods beginning on or after 1
classification criteria would be to conclude
January 2018.
that seventy-five percent or more of the
remaining economic life of the underlying
asset is a major part of the remaining
economic life of that underlying asset.
3
ASC
840-10-25-1.
4 IAS 17 (2008) para. 15.
5
IFRIC Update, September 2012.
6 IAS 17(2008) para 14.
7 Prior to amendment in 2009, IAS 17 required
initial classification of land leases to be based
on whether or not title passed. Where title to the
land did not pass and it had an indefinite
economic life, the land was normally classified
as an operating lease while the buildings
element was an operating lease or finance lease
according to the classification in the standard.
IAS 17 (2008) para. 15.
1684 Chapter 23
1685
Chapter 24
Leases (IFRS 16)
1 INTRODUCTION ........................................................................................... 1691
2 OBJECTIVE AND SCOPE OF IFRS 16 .......................................................... 1692
2.1
Objective of IFRS 16 .......................................................................................... 1692
2.2
Scope of IFRS 16 ................................................................................................. 1692
2.3 Recognition
exemptions
...................................................................................
1692
2.4 Definitions
............................................................................................................
1693
3 WHAT IS A LEASE? ...................................................................................... 1695
3.1
Determining whether an arrangement contains a lease ............................. 1695
3.1.1
Joint arrangements ............................................................................. 1696
3.1.2 Identified
asset
....................................................................................
1698
3.1.3 Substantive
substitution rights ......................................................... 1700
3.1.4
Right to obtain substantially all of the economic benefits
from use of the identified asset ........................................................ 1702
3.1.5
Right to direct the use of the identified asset ............................... 1
703
3.1.5.A
How and for what purpose the asset is used ............ 1703
3.1.5.B Relevant
decisions about how and for what
purpose the asset is used are predetermined ........... 1704
3.1.5.C
Specifying the output of an asset before the
period of use ................................................................... 1705
3.1.5.D Protective
rights
.............................................................
1705
3.1.6
Flowchart of the decision making process .................................... 1706
3.1.7 Reassessment
of
the contract ........................................................... 1707
3.2
Identifying and separating lease and non-lease components of a
contract ................................................................................................................. 1707
3.2.1
Identifying and separating lease components of a contract....... 1707
3.2.2
Identifying and separating lease from non-lease
components of a contract ................................................................. 1708
3.2.2.A
Lessee reimbursements ................................................ 1708
3.2.2.B Practical
expedient – lessees ...................................... 1709
1686 Chapter 24
3.2.3
Determining and allocating the consideration in the
contract – lessees ............................................................................... 1710
3.2.3.A
Determining the consideration in the contract ....... 1710
3.2.3.B
Allocating the consideration in the contract –
lessees ............................................................................... 1710