9 Leases Flashcards
What is the definition of a lease?
A lease is a contract that conveys the right to use an underlying asset for a period of time in exchange for consideration
What is the definition of a lessor?
The lessor is the entity that provides the right to use an underlying asset in exchange for consideration
What is the definition of a lessee?
The lessee is the entity that obtains the right to use an underlying asset in exchange for consideration
What is the definition of right of use?
A right of use asset represents a lessees right to use an underlying asset for the lease term
How is a lease liability recognised?
At present value of payments not made
How is a right of use asset recognised?
At cost
How is the depreciation worked out?
Shorter of lease term/UEL unless transfer of ownership at year end
What should lease payments include?
Fixed payments
Amounts expected to be payable under residual value guarantees
Options to purchase which are likely to be exercised
Termination penalties if likely to be cancelled
What is residual value guarantee?
When the lessor is guaranteed that the underlying asset at the end of lease term will it be worth less than a specified amount
What does the right of use asset comprise?
The amount of initial measurement
Lease payments made at or before the commencement date
Any initial direct costs
The estimated costs of removing or dismantling the asset
How is a sale and leaseback treated when it is not a sale?
Continue to recognise asset
Recognise a financial liability equal to proceeds received
How is a sale and leaseback treated when it is a sale?
Recognise the asset
Recognise a right of use asset as the proportion of the previous carrying amount that relates to the rights retained
Recognise a lease liability
A profit or loss on disposal will arise
