This issue discusses the application of MFRS 137 Provisions, Contingent Liabilities and Contingent Assets to onerous operating leases for the lessee.
This Hot Topic provides guidance on:
• determining when a lessee’s operating lease is an onerous contract
• recording provisions for onerous operating leases, including:
a) income available from sub-letting
b) the distinction between onerous contracts and future operating losses
c) the relationship between onerous contracts and asset impairment.