## Determine discount rate ifrs 16

The standard is very clear on what discount rate or incremental borrowing rate to use and is analysed further below. Clause IFRS 16.26 stipulates that a lessee discounts the lease payments using the interest rate implicit in the lease if this can be readily determined. In terms of the determination of the discount rate, IFRS 16 Basis for Conclusions 160 notes that: “The IASB’s objective in specifying the discount rate to apply to a lease is to specify a rate that reflects how the contract is priced”. The rate used per the standard is: the rate implicit in the lease, if readily determinable; or approach to determining discount rates can create internal inconsistencies between the discount rate and other inputs. For example, if the amount of pension benefits depends on returns on plan assets, the requirements in IAS 19 lead to an inconsistency between inputs used in estimating the cash flows and those used to determine discount rates. The revised discount rate at the lease modification date is 7%. Entity A determines that the increase in scope of the lease does not meet the criteria set out in paragraph IFRS 16.44 and therefore the increase in scope is not accounted for as a separate lease. At the modification date, as a first step, One of the most significant judgements for lessees in adopting IFRS 16, the new lease accounting standard, is determining the discount rate (essentially the interest rate implicit in the lease). The choice of discount rate is likely to materially impact the amount of the lease liability to be brought onto the balance sheet, and may have an impact beyond just the financial statements (for example, covenants and cash tax). IFRS 16 includes two ways to determine discount rates. The first is to use the rate implicit in the lease. If a lessee already has the information, it is straightforward to establish this rate. However, it is likely that in many cases lessees will not currently have sufficient information

## One of the most significant judgements for lessees in adopting IFRS 16, the new lease accounting standard, is determining the discount rate (essentially the interest rate implicit in the lease). The choice of discount rate is likely to materially impact the amount of the lease liability to be brought onto the balance sheet, and may have an impact beyond just the financial statements (for example, covenants and cash tax).

21 Feb 2020 A key challenge of IFRS 16 is determining the discount rate. This includes determining the rate implicit in the lease, the lessee's incremental A lessee is required to determine a discount rate for all leases recognised on IFRS 16 requires a lessee to measure lease liabilities on a discounted basis. IFRS 16 defines the lessee's incremental borrowing rate (IBR) as “The rate of interest that robust processes are in place for determining lease discount rates. 10 Apr 2019 The standard also states in IFRS clause 16.A that the lessee's 'incremental borrowing rate' is the rate of interest that a lessee would have to pay to 14 Jun 2018 Lease liability represents the present value of the lease payments discounted at the interest rate implicit in the lease if readily determinable. If not 15 Feb 2018 How to determine an appropriate discount rate is rapidly becoming the hot topic of lease accounting under IFRS 16. This is because it is one of

### 14 Jun 2018 Lease liability represents the present value of the lease payments discounted at the interest rate implicit in the lease if readily determinable. If not

9 Nov 2017 (a) International Financial Reporting Standard (IFRS) 16 Leases is revised discount rate is determined as the interest rate implicit in the lease

### IFRS 16 discount rates. The new standard states that lease payments shall be discounted using the interest rate implicit in the lease, if that rate can be readily determined, or the lessee’s incremental borrowing rate, if not. Interest rate implicit in the lease is the rate of interest that causes the present value of lease payments and the unguaranteed residual value to equal the sum of the fair value of the underlying asset, and any initial direct costs of the lessor.

In terms of the determination of the discount rate, IFRS 16 Basis for Conclusions 160 notes that: “The IASB’s objective in specifying the discount rate to apply to a lease is to specify a rate that reflects how the contract is priced”. The rate used per the standard is: the rate implicit in the lease, if readily determinable; or approach to determining discount rates can create internal inconsistencies between the discount rate and other inputs. For example, if the amount of pension benefits depends on returns on plan assets, the requirements in IAS 19 lead to an inconsistency between inputs used in estimating the cash flows and those used to determine discount rates. The revised discount rate at the lease modification date is 7%. Entity A determines that the increase in scope of the lease does not meet the criteria set out in paragraph IFRS 16.44 and therefore the increase in scope is not accounted for as a separate lease. At the modification date, as a first step,

## In terms of the determination of the discount rate, IFRS 16 Basis for Conclusions 160 notes that: “The IASB’s objective in specifying the discount rate to apply to a lease is to specify a rate that reflects how the contract is priced”. The rate used per the standard is: the rate implicit in the lease, if readily determinable; or

Under IFRS 16 ‘Leases’, discount rates are required to determine the present value of the lease payments used to measure a lessee’s lease liability. Discount rates are also used to determine lease classification for a lessor and to measure a lessor’s net investment in a lease.

11 Jun 2019 The staff analyse that IFRS 16 does not explicitly require a lessee to determine its incremental borrowing rate to reflect the interest rate in a loan 31 Dec 2019 IFRS 16 Leases, which requires lessees to bring most of their leases that were The determination of the discount rate can also be a significant judgement. IFRS 16 implicit in the lease, if that rate can be readily determined. 21 Dec 2018 A lessee will need to determine a discount rate for virtually every lease to which it applies the lessee accounting model in IFRS 16. However 16 Oct 2018 Upon initial adoption of IFRS 16, should the lessee measure the right-of-use asset using the same incremental borrowing rate that was used to (c)remeasure the lease liability by discounting the revised lease payments using a revised discount rate. The revised discount rate is determined as the interest 28 Jan 2020 new question added to provide HM Treasury discount rate. 16 Paragraphs B9- B31 of IFRS 16 give guidance on the assessment of whether a contracts are adequately considered to assess whether they are in essence a What discount rates do I apply? Under IFRS 16, lease liability is discounted using the rate implicit in the lease. Where this cannot be determined, the lessee's