Lessee leased some land and buildings from Lessor. There was no transfer of ownership and no bargain purchase option. If the fair value of the land is less than a certain percentage of the total fair value of the leased property at the inception of the lease, both the lessee and the lessor may consider the land and buildings as a single unit. What is that percentage?

Question

Quizplus · Accepted Answer

According to IFRS 16, if the fair value of the land is less than 25% of the total fair value of the leased property at the inception of the lease, both the lessee and the lessor may consider the land and buildings as a single unit. This means that for accounting purposes, the land and buildings can be treated as one asset, which can affect the lessee's amortization and depreciation expense.

Lessee Leased Some Land and Buildings from Lessor