Application of AASB 16 Leases
The ATSB adopted AASB 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 2019 is not restated, that is, it is presented as previously reported under AASB 117 and related interpretations.
The ATSB elected to apply the practical expedient to not reassess whether a contract is, or contains a lease at the date of initial application. Contracts entered into before the transition date that were not identified as leases under AASB 117 were not reassessed. The definition of a lease under AASB 16 was applied only to contracts entered into or changed on or after 1 July 2019.
AASB 16 provides for certain optional practical expedients, including those related to the initial adoption of the standard. The ATSB applied the following practical expedients when applying AASB 16 to leases previously classified as operating leases under AASB 117:
Apply a single discount rate to a portfolio of leases with reasonably similar characteristics;
Exclude initial direct costs from the measurement of right-of-use assets at the date of initial
application for leases where the right-of-use asset was determined as if AASB 16 had been applied
since the commencement date; and
Reliance on previous assessments on whether leases are onerous as opposed to preparing an
impairment review under AASB 136 Impairment of assets as at the date of initial application.
As a lessee, the ATSB previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under AASB 16, the ATSB recognises right-of-use assets and lease liabilities for their leases.
On adoption of AASB 16, the ATSB recognised right-of-use assets and lease liabilities in relation to leases of office space and automobiles, which had previously been classified as operating leases.
The lease liabilities were measured at the present value of the remaining lease payments, discounted using the ATSB’s incremental borrowing rate as at 1 July 2019. The Entity’s incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions.
The right-of-use assets were measured as follows:
a) Office space: measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.
b) All other leases: the carrying value that would have resulted from AASB 16 being applied from the commencement date of the leases, subject to the practical expedients noted above.