Overview:
Cradle prepares the disclosure required under IFRS 16, which requires to calculate the Maturity Analysis using the undiscounted cash flow.
What Does the Accounting Standard Say About the Treatment of Maturity Analysis?
According to IFRS 16, paragraph 58, “A lessee shall disclose a maturity analysis of lease liabilities applying paragraphs 39 and B11 of IFRS 7 Financial Instruments: Disclosures separately from the maturity analyses of other financial liabilities.”
It is worth highlighting that the appropriate number of time bands is up to the accountant’s judgement. Cradle has decided to provide year time bans as it appears best practice for leases given, that’s what IFRS 16 paragraph 94 suggests for a lessor and ASC 842, the US lease accounting standard specifically states for year time bands
Also worth noting is that the standard requires to calculate the contractual undiscounted cash flows as opposed to the the discounted cash flows
How Does Cradle Prepare Maturity Analysis?
Cradle prepares a Maturity Analysis for the Disclosure Report. As required by IFRS 16, it breaks down the contractual undiscounted cash flows by years and calculates the total undiscounted lease liabilities.
FAQs:
Why does the maturity analysis total not equal the total lease liability amount in Cradle? The total lease liability amount on the balance sheet and disclosure are the discounted lease liability. In contrast, the amounts on the maturity analysis represent the undiscounted lease liability.
The time band in Cradle does not line up with the time band provided by my auditor. Why? IFRS 7 paragraph B11 states that “entity uses its judgement to determine an appropriate number of time bands”
Further Reading: