BLM52010 - IFRS 16 leases: IFRS 16 lessees: The spreading rules: The basic calculation

Where the change of basis provisions treat any receipt, expense, adjustment income or adjustment expense as arising in consequence of the recognition of a right-of-use asset resulting from the adoption of IFRS 16, any such amount is to be treated as arising over a period (“the spreading period”) determined in accordance with five steps.

• Step 1 requires the lessee to calculate the net debits and credits brought into account for each lease.
• Step 2 requires the lessee to calculate a percentage for each lease (“the relevant percentage”) by dividing the Step 1 amount for each lease by the total amounts for the lessee for all leases to which Step 1 applies (treating each Step 1 amount as a positive amount) and multiplying by 100.
• Step 3 requires the lessee to multiply the relevant percentage found under Step 2 by the remaining period outstanding, in days, of the lease as at the date of transition. (The term of the lease is determined in accordance with GAAP).
• Step 4 requires the lessee to add together all of the amounts calculated under Step 3. This will result in the weighted mean of remaining periods of the leases affected by the IFRS 16 transitional adjustments.
• Step 5 provides that the spreading period is the number of days found under Step 4 beginning with the day on which the first period of account begins.

Leases are considered individually, but portfolios of leases having similar characteristics may be considered as a group if that is the treatment adopted under GAAP.

An example of a spreading calculation can be found at BLM52015.