IFRS 16

Question 1

Commencement date

Answer 1

The date which the lessor makes the underlying asset available for use by the lessee

Question 2

Economic life

Answer 2

The period which the asset is economically usable can be derived from an asset OR the number of production or similar units expected to be obtained from an asset by one or more users

Question 3

Effective date

Answer 3

The date at which both the lessor and the lesse agree to a lease modification

Question 4

Fair value

Answer 4

The amount at which the lessor can obtain for an exhange for an asset or liabilty settled at market value

Question 5

Finance lease

Answer 5

A lease that transfers substantially all the risks and rewards incidental to ownership of an underlying asset

Question 6

Fixed payment

Answer 6

The payment made by a lessee to a lessor for the right to use an underlying asset during the lease term which excludes variable lease payments

Question 7

Inception date of a lease

Answer 7

The earlier date of a lease agreement the commencement of the lease OR the date which both parties agreed to the contract to the principal terms and conditions of the lease contract

Question 8

Initial direct costs

Answer 8

Incremental costs of obtaining a lease that otherwise would not have occurred had the lease never been obtained, except ofr costs incurred by a manufaccturer or dealer lessor in connection with a finance lease

Question 9

Implicit interest rate

Answer 9

The interest rate that causes the PV of:
-lease payments AND
-Unguaranteed residual value 
TO equal to:
-Fair value of the underlying asset AND
-initial directs of the lessor

Question 10

Lease

Answer 10

A contract, or part thereof that conveys the right to use an underlying aset for a period of time in exchange for consideration

Question 11

Lease incentives

Answer 11

Payments made a lessor to a lessee associated with a lease or reimbursement or assumption by a lessor of costs of a lessee.

Question 12

Lease payments

Answer 12

Payments made to a lessor by the lesse for an underlying asset, it’s made up of:

• fixed payment less lease incentives
• variable lease payments that depend on a index or rate
• the exercise of a purchase option if it is reasonable certain that the option will be exercised
• payment penalties for terminating the lease, if the lease term reflects the lesse exercising an option to terminate the lease

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Question 13

Lease payments(lessee)

Answer 13

Lease payments payable under residual value guarantees, excludes non-lease components of a contract, unless the lessee elects to combine the non-lease components with the lease components as a single component.

Question 14

Lease payments(lessor)

Answer 14

Includes residual value payments guaranteed by the lessee, a party related to the lessee or an unrelated 3rd party to the lessor . They exclude non-lease companents

Question 15

Lease term

Answer 15

Non-cancellable period for which a lessee has the right to use an underlying asset, together with both:
-periods covered by an option to extend the lease if the lessee is reasonable certain to exercise that option

-periods covered by an option to terminate the lease if the lesse if reasonable certain to exercise that option

Question 16

Lessee

Answer 16

An entitity that obtains the right to use an underlying asset for a period of time in exchange for consideration

Question 17

Lessee incremental borrowing rate

Answer 17

Rate of interest that a lesse would have to pay to borrow over a similar term and with a similar security the funds necessary to obtain an underlying asset of a similar value to a right-of-use asset in a similar economic environment

Question 18

Residula value guarantee

Answer 18

Guarantee made by the lessee to lessor