Chapter 11 - IFRS 16 leases Flashcards
What is a lease?
A contract that conveys the right to use an asset for a period of time in exchange for consideration
At the commencement of the lease, what should the lessee recognise?
- a lease liability
- right of use asset
What is the lease liability initially measured as?
Present value of unpaid lease payments
What should lease payments include?
- Fixed payments
- Variable lease payments
- Amounts expected to be paid under residual value guarantees
- Purchase option
- Payment pens
What is the right of use asset initially recognised as?
Cost
What is included in initial cost of the right of use asset?
- Initial measurement of lease liability
- Lease payments made at/before commencement date
- Initial direct costs
- Costs of removal
What is the double entry for an increase in the carrying amount?
Dr - Finance Costs
Cr - Lease Liability
What is the double entry for a decrease in the carrying amount?
Dr - lease liability
Cr - Cash
What are examples of low value assets?
- Tablets
- Laptops
- Telephones
- Small items of furniture
What is used to determine whether an asset is low value?
Value when new
What is the initial journal entry to record a lease?
Dr - Right of use asset
Cr - Lease liability
Cr - Cash
how is the right of use asset calculated?
Lease liability + lease payments made + initial direct costs
How is the lease liability calculated?
Lease payment x discount factor
How is the initial cost of right of use asset calculated?
Initial liability + direct costs
How is the right of use measured?
Initial cost - depreciation - impairment losses
How is depreciation calculated when at the end of the lease ownership is transferred?
Depreciation charged over asset’s remaining useful life
How is depreciation normally charged on a lease?
Charged on the shorter of:
- Useful life
- Lease term
What are the headings for a payment in arrears lease liability table (left to right)?
Year
Bal b/f
Interest
(Payment)
Bal c/f
What are the headings for a payment in advance lease liability table (left to right)?
Year
Bal b/f
(Payment)
Subtotal
Interest
Bal c/f
On a payments in advance table, how is current liability calculated?
Year 1 Bal c/f - Year 2 subtotal
On a payments in advance table, what reflects non-current liability?
Year 2 subtotal
Where are finance costs expensed to?
SPL
What is the method of constructing financial statements for payments in arrears?
- Calc lease liability
- Calc right of use
- Calc depreciation and finance costs
- Current and non-current liabilities
What is the method of constructing financial statements for payments in advance?
- Calc lease liability
- Calc right of use (including advance payment)
- Calc depreciation and finance costs
- Current and non-current liabilities
On a payments in arrears table, how is current liability calculated?
Year 1 c/f - year 2 c/f
On a payments in arrears table, how are non-current liabilities calculated?
Year 2 c/f
