Lease liabilities for sale and leaseback transactions to include variable lease payments that do not depend on an index or rate

The accounting approach taken by entities entering into sale and leaseback transactions may significantly change as a result of amendments to IFRS 16 Leases, issued by the IASB on 22 September 2022.

Where a sale and leaseback transaction qualifies to be recognised as a sales transaction under IFRS 15 Revenue from Contracts with Customers, the seller-lessee must subsequently measure its lease liability from the sale and leaseback transaction in such a way that it recognises no gain or loss related to the right of use it retains.

In practice, this means that:

  • The lease liability initially recognised by a seller-lessee for a sale and leaseback transaction includes variable lease payments that are not dependent on an index or rate if they can be reasonably estimated. The difference between the actual variable lease payments made, and estimated variable lease payments recognised as part of the initial lease liability will be recognised in profit or loss in the period in which they are incurred
  • If not part of a sale and leaseback transaction, lease liabilities do not include such variable payments, which are instead expensed in profit or loss in the period in which the event or condition that triggers those payments occurs.


More information

BDO’s IFR Bulletin summarises the amendments and includes practical examples illustrating the effect of the amendments. If you require further assistance, please contact our IFRS Advisory Team.

For more on the above, please contact your local BDO representative.