Chapter 8 - Leases Flashcards Preview

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Flashcards in Chapter 8 - Leases Deck (18)
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1
Q

What is a lease?

A

A contract that conveys the right to use an underlying asset for a period of time in exchange for consideration

2
Q

What is the definition of a lessor?

A

The entity that provides the right-of-use asset and, in exchange, receives consideration

3
Q

What is the definition of a lessee?

A

The entity that obtains use of the right-of-use asset and, in exchange, transfers consideration

4
Q

What is the definition of a right-of-use asset?

A

The lessee’s right to use an underlying asset over the lease term

5
Q

How does IFRS 16 leases require a lessee to recognise a lease?

A

Recognise an asset and a liability unless the lease is short term or of a minimum value

6
Q

When does a contract contain a lease?

A

The right to control the use of an identified asset for a period of time in exchange for consideration

7
Q

What must a contract give the customer?

A

The right to substantially all of the identified asset’s economic benefits or the right to direct the identified asset’s use

8
Q

How do you recognise a lease liability?

A

Fixed payments + variable payments, amounts expected to be paid

9
Q

How do you recognise a right of use asset?

A

Initial value of the lease liability + deposits + direct costs + removal costs

10
Q

What does the lease term compromise of?

A

Non-cancellable periods, periods covered by an extension or termination

11
Q

What is the definition of a finance lease?

A

Where the risks and rewards of the underlying asset substantially transfer to the lessee

12
Q

What is the definition of a operating lease?

A

Lease that is not a finance lease

13
Q

When is a lease a finance lease rather than a operating lease?

A
  1. Ownership transfers
  2. Option to purchase
  3. Lease term is the major part of the assets economic life
  4. Present value of the lease payments amounts to substantially all of the fair value of the asset
  5. Specialised asset
14
Q

How does a lessor account for an operating lease?

A

Operating lease on a straight line basis over the lease term

15
Q

How does a lessor account for a finance lease at inception?

A

Present a receivable, should be equal to net investment in the lease

16
Q

How do you calculate the net investment is the present value?

A
  1. Fixed payments, variable payments, residual value guarantees, unguaranteed residual values, termination penalties
17
Q

How should a seller-lessee record a transfer if its not a sale?

A

Continue to recognise asset, and recognise a financial liability equal to proceeds received

18
Q

How should a seller-lessee record a transfer if it is a sale?

A

Recognise the asset, recognise a right-of-use asset as the proportion of the previous carrying amount, recognise a lease liability