IFRS 16 Lessee Accounting Example 3 [Video]

This video shows how the lessee should account for a lease under IFRS 16 when (1) there is an unguaranteed residual value and (2) the lessor’s implicit interest rate is unknown to the lessee.

Because the residual value is not guaranteed, the lessee will not be required to compensate the lessor if the residual value fails to meet a certain threshold.

Because the lessor’s implicit interest rate is unknown to the lessee, the lessee’s incremental borrowing rate will be used to discount cash flows when measuring the lease liability.
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