Non refundable VAT and IFRS16

Normally, VAT does not form part of the value of the asset on the balance sheet. And what if the VAT paid, the so-called non-refundable VAT, cannot be offset for tax purposes? In that case it is customary to report the asset including VAT.

Operating leases, with their usual terms including VAT, are required to be shown on the balance sheet under IFRS16. Question: Should a leased asset also be valued on the basis of payment obligations, including VAT?

Audit firms appear to have different views on the matter. There is therefore room for ‘best market practice’.

Detailed considerations can be found in this document.
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