BLM52010 | Right-of-use assets: right-of-use asset lessees: the spreading rules: the basic calculation

Where the change of basis provisions treat any receipt, expense, adjustment income or adjustment expense as arising in consequence of the recognition of a right of use asset resulting from the adoption of an accounting standard, any such amount is to be treated as arising over a period (“the spreading period”) determined by the lessee in accordance with five steps

1. calculate the net debits and credits brought into account for each lease.

2. calculate a percentage for each lease (“the relevant percentage”) by dividing the Step 1 amount for each lease by the total amounts for the lessee for all leases to which Step 1 applies (treating each Step 1 amount as a positive amount) and multiplying by 100.

3. multiply the relevant percentage found under Step 2 by the remaining period outstanding, in days, of the lease as at the date of transition (the term of the lease is determined in accordance with GAAP).

4. add together all the amounts calculated under Step 3. This will result in the weighted mean of remaining periods of the leases affected by the transitional adjustments.

5. the spreading period is the number of days found under Step 4 beginning with the day on which the first period of account begins.

Leases are considered individually, but portfolios of leases having similar characteristics may be considered as a group if that is the treatment adopted under GAAP.

An example of a spreading calculation can be found at BLM52015.