IFRS 16 Flashcards
What does IFRS 16 leases not apply to?
Non-regenerative resources
IAS 41
IFRS 15
IAS 38
What may a lessee elect to account for?
Lease payments as an expense on a straight-line basis over lease term
What happens with leases with a lease term of 12 months or less and containing no purchase options?
This election is made by class of underlying asset
Example where an election can be made on a leas-by-lease basis?
Leases where underlying asset has low value when new
When is a contract a lease?
Where it conveys the right to control use of an identified asset for a period of time in exchange for consideration
Where is control conveyed?
Where customer has both right to direct identified asset’s use
Obtain all economic benefits from that use
How is an asset typically identified?
By being explicity specified in a contract
Where a supplier has substantive right of substitution throughout period of use?
Customer does not have a right to use an identified asset
When is a supplier’s right of substitution only considered subtantive?
If supplier has both practical ability to substitute alternative assets throughout period of use and would economically benefit from substitution
When is a capacity portion of an asset still an identified asset?
If it is physically distinct
For a contract that contains a lease component and additional lease and non-lease components?
Lessees shall allocate consideration payable on basis of relative stand-alone prices
What may a lessee elect?
Account for all components as a lease
Interest rate implicit in the lease?
Interest rate that yields a present value of the lease payments and unguaranteed residual value
Lease payments and unguaranteed residual value must equal?
The fair value of the underlying asset
Initial direct costs of the lessor
What is the lease term?
Non-cancellable period for which a lessee has right to use an underlying asset
What is added on to the non-cancellable period?
Periods covered by an extension option and termination option
What is the lessee’s incremental borrowing rate?
Rate of interest a lessee has to pay to borrow funds necessary to obtain an asset similar to right-of-use asset
What happens upon lease commencement?
A lessee recognises a right-of-use asset and a lease liability
How is right-of-use asset initially measured?
Amount of lease liability + initial direct costs incurred by the lessee
When maya djustments to leases be required?
For lease incentives
What happens after lease commencement?
Shall measure right-of-use asset through cost model. Unless IAS 40 or IAS 16
Cost model for right-of-use asset?
Cost - accumulated depreciation - accumulated impairment
How is lease liabiltiy initially measured?
At PV of the lease payments payable over the lease term, discounted at rate implicit in lease if it can be readily determined
If rate can’t be determined in lease liaibility?
Use their incremental borrowing rate
What happens with variable lease payments are included in measurement of lease liabiltiy?
These are recognised in profit or loss in the period in which condition that triggers payment occurs
When is lease liability subsequently measured to reflect changes?
In lease term
Assessment of purchase option
Amounts payable under residual value guarantees
Future lease payments
How are remeasurements treated?
As adjustments to the right-of-use asset
How shall lessors classify each lease?
As an operating lease or a finance lease
When is a lease classified as a finance lease?
If it transfers substantially all risks and rewards incidential to ownership of an underlying asset
Examples of a finance lease?
Transfers ownership
Option to purchase asset at price lower than fair value
Term for major part of economic life of asset
How should lessor recognise assets held under a finance lease?
As a receivable at amount equal to net investment in the lease
How does lessor reoognise finance income?
Over the lease term of a finance lease
What happens at commencement date/
Lessor recognises selling profit or loss in accordance with its policy for outright sales
How does a lessor recognise operating lease payments?
As income on a straight line basis
What is done to determine whether transfer of an asset is accounted for as a sale?
Entity applies requirements of IFRS 15 for determninig when performance obligation satisfied
What if asset transfer satisfies IFRS 15’s requirements to be accounted for as a sale?
Seller measures the right-of-use asset at proportion of previous carrying amount of gain/loss that relates to rights transferred to buyer
What if fair value of sale consideration does not equal the asset’s fair value?
Sales proceeds are adjusted to fair value
How does a seller-lessee subsequently measures lease liabilities?
From a leaseback in a way that it doesn’t recognise any amonut of gain or loss relating to right of use
