Chapter 4 - Leases

Question 1

What standards covers leases and right-of-use assets?

Answer 1

IFRS 16

Question 2

When did IFRS 16 for leases take effect

Answer 2

Periods beginning on or after 1 January 2019

Question 3

An entity (as lessor) licences intellectual property. Is this covered by IFRS 16 and treated as a lease?

Answer 3

No. This would be covered by IFRS 15 (Revenue from Contracts with Customers)

Question 4

An entity has a licensing agreement entered into by a lessee for motion pictures, video recording, manuscripts, patents or copyrights.

Are these treated as a lease under IFRS 16?

Answer 4

No.

This is covered under IAS 38 as an intangible asset.

Question 5

What is the definition of a lease per IFRS 16?

Answer 5

Contract or part of a contract
Conveys the right to use an asset
For a period of time
In exchange for consideration.

Question 6

What are the 2 types of leases per IFRS 16?

Answer 6

1. Finance lease - transfers substantially all the risks and rewards incidental to ownership
2. Operating lease - does not transfer all the risks and rewards incidental to ownership

Question 7

True or false:

An operating lease transfers substantially all the risks and rewards incidental to ownership of an underlying asset.

Answer 7

False.

When the risks are transferred, this is a finance lease.

An operating lease does NOT transfer the risks and rewards of an underlying asset.

Question 8

What points should be considered when determining whether an agreement contains a lease under IFRS 16?

Answer 8

• Whether throughout the period of use the customer has the right to obtain substantially all of the economic benefits from use of the identified asset
• Whether it has the right to direct the use of the identified asset