SOCPA approves the amendment of the International Accounting Standards Board to International Financ

SOCPA approves the amendment of the International Accounting Standards Board to International Financial Reporting Standard No. 16

SOCPA approves the amendment of the International Accounting Standards Board to International Financial Reporting Standard No. 16

Saudi Organization for Chartered and Professional Accountants, represented by the Accounting Standards Council, has approved the amendment made by the International Accounting Standards Board to International Financial Reporting Standard No. 16 "Lease Contracts". The amendment to the standard focuses on adding paragraph No. (102a), which reads as follows:
"After the commencement date, the seller-lessee shall apply paragraphs 29–35 to the right-of-use asset arising from the leaseback and paragraphs 36–46 to the lease liability arising from the leaseback. In applying paragraphs 36–46, the seller-lessee shall determine ‘lease payments’ or ‘revised lease payments’ in a way that the seller lessee would not recognize any amount of the gain or loss that relates to the right of use retained by the seller-lessee. Applying the requirements in this paragraph does not prevent the seller-lessee from recognizing in profit or loss any gain or loss relating to the partial or full termination of a lease as required by paragraph 46(a)."
The amendment to the standard aims to confirm that any gains or losses resulting from sale (which also includes a leaseback) will not be recognized in relation to the part of the value of the asset sold that relates to the amount calculated as the original right-of-use resulting from the lease contract when re-measuring as in the case of the initial proof. In other words, the proven gain or loss relates only to the part of the value of the asset that represents the fact of the sale and is related to the part transferred to the buyer.
 
This amendment was introduced in response to inquiries from the International Interpretations Committee regarding the post measurement of lease liability.
The Accounting Standards Council of SOCPA decided to adopt this amendment with the addition of a disclosure requirement in which the establishment explains the following:
- How to calculate the lease liability in accordance with the requirements of the standard in relation to sales and then leaseback contracts in which the lease payments are variable according to the performance of the asset.
- The right of the lessor with respect to sales and then leaseback contracts in which the lease payments are variable represents a percentage of the future performance of the leased asset, and does not represent a specific amount at the time of the contract.
- The amount of proven gains and the amount of unrecognized gains from the sale contract.

You can view the amendment by clicking here.

Last Update On: 19 Feb 2023