Peppercorn leases are leases with significantly below-market terms, principally to enable the not-for-profit entity (NFP) to further its objectives. Typically peppercorn lease payments are really small (e.g. $1 per year, or $100 per year), and therefore not quantitatively material to the financial statements of lessees, meaning that such leases would seldom be capitalised on the balance sheet under IFRS 16 Leases.
NFP lessees that elect to use the ‘cost’ method for accounting for peppercorn leases must disclose additional qualitative and quantitative information about these leases to meet the disclosure objective in IFRS 16, paragraph 51.
The objective of the disclosures is for lessees to disclose information in the notes that, together with the information provided in the statement of financial position, statement of profit or loss and statement of cash flows, gives a basis for users of financial statements to assess the effect that leases have on the financial position, financial performance and cash flows of the lessee...
Extract of IFRS 16, paragraph 51
The additional information regarding peppercorn leases must include, but is not limited to, information that helps users understand:
Paragraph Aus59.2 requires the above disclosures for peppercorn leases to be provided individually for each material peppercorn lease.
For leases that are not individually material, NFPs are permitted to provide the paragraph Aus59.1 disclosures in aggregate for peppercorn leases for right-of-use assets of a similar nature. NFPs have discretion to aggregate or disaggregate information so that useful information is not obscured by too much insignificant detail, and information with substantially different characteristics is not aggregated.