In
my last article I discussed impairment considerations regarding
the new IFRS standard—IFRS 16 Leases—and its
implications for a lessee. In this article I would like to show you
one more consideration regarding the impairment of leases which may
not be so apparent at first glance. Additionally I'll discuss
the accounting treatment of an impairment of leases for a
lessor.
One more aspect to consider
The impairment of a right-of-use (ROU) asset with respect to
leases for lessees reminds me of another often neglected aspect:
onerous contracts. Does it ring a bell? Onerous contracts are
governed by IAS 37 Provision, Contingent Assets, and Liabilities
and are applied to any contract for which unavoidable costs of
meeting the contract obligations exceed the economic benefits
expected to be received under that contract. Such guidance was
greatly applicable for lessees and operating leases. If an
operating lease became onerous, based on IAS 37, a lessee would
book a
