therefore a first time adopter is required to classify leases as operating or financ 611670

IFRS 1 does not include any specific exemption from the retrospective application of IAS 17 Leases and SIC-15 Operating Leases Incentives. Therefore, a first-time adopter is required to classify leases as operating or finance leases under IAS 17 based on the circumstances existing at the inception of the lease and not those existing at the date of transition to IFRSs. [IFRS 1.IG14]. However, if ‘at any time the lessee and the lessor agree to change the provisions of the lease, other than by renewing the lease, in a manner that would have resulted in a different classification of the lease … if the changed terms had been in effect at the inception of the lease, the revised agreement is regarded as a new agreement over its term. [IAS 17.13]. In other words, an entity classifies a lease based on the lease terms that are in force at its date of transition to IFRSs; the lease classification is not based on lease terms that are no longer in force.