The Saudi Organization for Chartered and Professional Accountants shared its opinion on the draft amendment by the International Accounting Standards Board on IFRS 16, which includes setting requirements for measuring lease liabilities in sales with re-leasehold transactions.
The amendment is based on considering the variable rent - which does not depend on a rate or indicator - as part of the lease liabilities, and the lessee is required to estimate and include it in the lease liabilities.
After studies the draft amendment, SOCPA considered that most of the foundations upon which the amendment draft was built may conflict with the definition of the liabilities contained in the conceptual framework, and may conflict with the basic requirements in the standard, which exclude the variable lease from the components of the lease contract obligations, and therefore there is no conceptual basis for the distinction in dealing with variable lease in normal lease transactions and in sales transactions with leaseback.
SOCPA believes that the agreement of the parties to the lease contract on a variable lease related to the performance of the lessee is based on bases that differ from the foundations on which the fixed lease contracts are based, as the first type of contracts is more like a sharing in profit, and therefore the definition of liabilities may not apply to it.
Details of SOCPA views can be found
here.