Leases prepaid for years in advance
How should we account for leases paid in advance for 25 years?
We made a one-off payment for the lease of the land for 25 years at the commencement of the lease, and we will not make any further payments.
At the end of the lease term, we can renegotiate the lease or give up the land.
How to account for similar situation?
Very interesting situation, but not unusual.
Here, no lease liability is created because the present value of the lease payments not paid at the commencement date is zero (as all is paid).
Thus your entry would be:
Debit Right-of-use asset;
Credit Cash or bank account.
JOIN OUR FREE NEWSLETTER AND GET
report "Top 7 IFRS Mistakes" + free IFRS mini-course
Please check your inbox to confirm your subscription.
- Accounting Policies and Estimates (14)
- Consolidation and Groups (24)
- Current Assets (21)
- Financial Instruments (54)
- Financial Statements (48)
- Foreign Currency (9)
- IFRS Videos (63)
- Insurance (1)
- Most popular (6)
- Non-current Assets (54)
- Other Topics (15)
- Provisions and Other Liabilities (44)
- Revenue Recognition (26)