IFRS 16 - Leasing Flashcards
what is a lease?
a contract that conveys the right to use an asset for a period of time in exchange for payment
what two components are included in the initial recognition of a lease?
DR Right of use asset (A)
CR Lease liability (L)
what do we do with leases which are short-term or low value?
can just expense the lease payments
what does a contract need to be lease?
1) conveys the right to control the use
2) of an identified asset
3) for a period time
4) in exchange for a consideration
what is needed for right to control use?
- direct how/purpose for which asset is used throughout the period
- right to operate asset with supplier changing operating instructions
- lessee designs asset in a way that predetermines purpose of asset use
how do we account if there is no lease?
use IAS 16
when do we begin recognition of the lease contract?
on commencement of the agreement
which periods do we include in the lease term?
non-cancellable period of the lease and periods covered by the option to:
- extend the lease
- terminate the lease
(if reasonably expected to)
what do we include in the lease liability cost?
- fixed/variable payments
- RV guarantees
- penalties for termination
- purchase option exercise price
what do we do with payments made on / before the commencement date?
include in ROU but not in LL
if we lease land on the reval / cost model?
depreciate over lease term
how do we account for the sub-leasing of a lease?
account for ROU as investment property
what if lease transfers ownership / exercise purchase option (for depr)?
depreciate till end of EUL
how do we depreciate the ROU generally?
earlier of EUL and end of lease term
