5‑70 Operating leases and intragroup fin5‑70 Operating leases and intragroup finance leases

5‑70 Operating leases and intragroup finance leases

(1) This section applies if: (a) in a Fiscal Year, the Constituent Entity holds property for lease; and (b) the property is located in the jurisdiction mentioned in subsection 5‑65(1); and (c) if paragraph (d) does not apply—the lease is accounted for as an operating lease in the Constituent Entity’s financial statements for the Fiscal Year; and (d) if the lease is accounted for as an finance lease in the Constituent Entity’s financial statements for the Fiscal Year—the parties to the lease are all Constituent Entities of the MNE Group. (2) Despite paragraph 5‑65(1)(b): (a) do not exclude from the result of paragraph 5‑65(1)(a) the carrying value of the property held for lease; and (b) if: (i) the property is not a short‑term rental asset under subsection (3) for the Fiscal Year; and (ii) the parties to the lease are not all Constituent Entities of the MNE Group; exclude from that result the right‑of‑use amount for the lease computed in accordance with subsection (4). (3) For the purposes of subparagraph (2)(b)(i), a property is a short‑term rental asset under this subsection for a Fiscal Year if: (a) the property was leased regularly during the Fiscal Year to different lessees; and (b) the average length of the periods for which it was leased does not exceed 30 days. (4) For the purposes of paragraph (2)(b), the right‑of‑use amount for the lease is the amount of the undiscounted value of any outstanding payments under the lease (see subsection (5)), computed based on the average of that amount at the beginning of the Fiscal Year and that amount at the end of the Fiscal Year. (5) For the purposes of subsection (4), in determining the value of those outstanding payments: (a) apply the accounting standard used in determining the Financial Accounting Net Income or Loss of the Constituent Entity; and (b) include the value of any outstanding payments that would be due under any extension to the lease that would fall to be accounted for in accordance with that standard.