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We support the proposed new Illustrative Example 25 (“IE 25”) to address the scenario of a sale and leaseback transaction with variable payments. However, we disagree with classifying the liability arising from such transaction as a “lease liability” in IE 25 as the inclusion of variable lease payments contradicts the existing measurement requirement of lease liability. In our view, this liability is a “financial liability” under IFRS 9 because this liability relates to the portion of the asset that is not “sold” to the buyer-lessor and is in substance, a loan obtained from the buyer-lessor.
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