IFRS – Practical Issues Series

Episode 1 - IFRS 16

Considering the practical issues Finance and Accounting teams are faced with on a regular basis while accounting under complex situations and circumstances that may not be easy to interpret from the standard, Ed-Watch has started a series on IFRS – practical issues.

In this series we’ll cover one standard in each episode and discuss practical issues arising while accounting for with the experts. You can send in your queries for selection as a case study at [email protected]

You can also ask questions during the live session.

Episode 1: IFRS 16

Case Study:

A logistics Company, the lessee, acquired a leased land of 5 acres for 10 years at an ROU of PKR 1 million, and the lease is classified as a finance lease. The lessee later constructed a warehouse on a portion of the land of 3 acres at a cost of USD 35 million which was initially taken to Capital Work in progress.

The lessee is considering leasing the warehouse to another company. Assuming all the conditions of a finance lease are met, the management is dealing with the following questions:

  1. Should the lease of the warehouse be treated as a new lease altogether or should it be treated as a sub-lease considering the lease includes the portion of the land?
  2. If the lease is to be treated as a sub-lease, what will happen to the CWIP cost? since IFRS 16 restricts the subleasing to the ROU of the existing lease and in this case, only the ROU relevant to the sublease will be considered?
  3. If the lease rental for the whole lease term amounts to PKR 40 million with the NPV being USD 30 million, should the company record a loss at the time of initial recognition?

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IFRS 16 updates - Sale and Leaseback transactions

IASB had been working on the updates of Sale and leaseback and now they have issued the amendments to Sale and leaseback transactions.

  • What is the background of these changes?
  • What are the major impacts?
  • What period are these changes applicable from?

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Profile of Experts:

Nabeel Shaikh is carrying 16 years of diversified experience in management consulting, banking operations, business development and business transformation. He is MSc in Accounting and Finance from University of Northampton, UK and also member of Institute of Chartered Accountants of Pakistan. He started his entrepreneurial journey with formation of Nash Technologies (Pvt) Limited in 2017. Nash Technologies is software house with expertise in software and application development. He joined Ed-Watch as Co-founder in 2020 to leverage on his corporate training and strategy development expertise. He has founded a multi language blogging platform named as Nashperspective.com worth of $1.1m and successfully raised seed capital for it. He is also Fintech certified from Said Business School, Oxford University and mentoring a couple of Fintech firms in GCC. Additionally, he is also non-executive BOD member of Brannovate and Mavens Advisor. He is currently associated as Financial Advisor in multi-billion dollar worth company in technology sector.

Sana Quadri: Ms. Sana is an experienced process improvement & digital solution enthusiast & a finance professional who is an IFRS expert. She has worked with prestigious organizations in senior positions including in the role of Chief Financial Officer and remained associated with the financial services industry for over 12 years., she is also a trainer for IFRSs and Financial Storytelling techniques. Some of the companies whose professionals she has trained include:

  • HBL
  • Biafo Industries
  • Treet Corporation
  • Attock Cement
  • Macpac Films
  • Shan Foods
  • Atlas Funds
  • DIC Pakistan
  • UBL Funds