BLM51020 - Right-of-use assets: right-of-use asset lessees: taxation of right-of-use assets: impairments

The example below relates to a property lease.

IAS 36 Impairment of Assets requires the lessee to consider whether the lease has become impaired.  This is an accounting test.  Examples where a lease may need to be impaired would be if a property is vacated and there is no likelihood that the lessee will derive a future benefit from it, such as sub-leasing the property.  If you have no reason to believe that the impairment of the right-of-use asset is not GAAP compliant the impairment should be accepted.  Any instances where the lessee is still using the asset but there has been a significant impairment should be reviewed by an advisory accountant once all of the relevant facts have been obtained.

Example

Using the example in BLM51015 at the end of year 8 of the lease the lessee vacates the property. Given there are only two years left on the lease the lessee바카라 사이트™s accountants conclude that no future economic benefit will be derived from the asset and fully impairs the right-of-use asset.  The lease liability will continue to be shown on the balance sheet. 

The following table sets out the accounting and tax adjustments arising in year 8 of the lease, which is the accounting period ended 31 December 2026.

Profit and Loss Account

Depreciation of right-of-use asset

Dr £11,500

Impairment of right-of-use asset

Dr £23,000

Interest expense

Dr   £1,763

Tax Adjustments

Addback

Capital dilapidation costs

         £750

Capital lease premium costs

         £540