D4-IFRS 16 Lease

Question 1

1. identifying a lease

Answer 1

a contract is, or contains, a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration

Question 2

2. accounting by lessees

Answer 2

1. upon lease commencement a lessee recognises a right -of -use asset and a lease liability.
2. the ROU is initially measured at the amount of the lease liability plus any initial direct costs incurred by the lessee. adjustments may required for lease incentives, payments at or prior to commencement and restoration obligations or similar.
   the ROU represents the fact that we have the right to use the equipment for the lease term.
3. the lease liablity is initially measured at the present value of the lease payments payable over the lease term, discounted at the rate implicit in the lease if that can be readily determined. if that rate cannot be readily determined, the lessee shall use their inremental borrowing rate.
   the liablity reflects the fact that we have a future oligation to pay the lease payments over the lease term.
4. IFRS 16 states the lease term should be the period of non-cancellable payments plus any optional period if the option is reasonably certain of being exercised.

Question 3

3. the right-of-use asset

Answer 3

1. under IFRS 16: leases, the right-of-use asset is initially recognised at cost. the initial cost of the ROU comprises:
   - the amount of the intial measurement of the lease liability;
   - lease payments made at or before the commencement date;
   - any intial direct costs and the estimated costs of removing or dismantling the asset.
2. in the december 2021 financial statements, the value of the ROU will be measured at its initial cost less accumulated depreciation and impairment losses.
3. insubsequent years, there will be a further depreciation charge each year and further reductions in the ROU