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IAS & IFRS Standards Overview > IFRS 16 > Flashcards

IFRS 16 Flashcards

1
Q

What should lessee initially recognise? (aspects of lease)

A

The right-of-use asset and lease liability

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2
Q

RIght-of-use asset measurement?

A

Measured at amount of lease liability + initial direct costs incurred by lessee + deposit paid

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3
Q

Examples of initial direct costs incurred by lessee?

A

Lease liability
Estimated costs for dismantling
Payments less incentives before commencement date

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4
Q

Lease liability measurement? (PV)

A

Measured at PV of lease payment payable over lease term, discounted at rate implicit in lease

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5
Q

Subsequent right-of-use asset measurement?

A

Cost - accumulated depreciation

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6
Q

Subsequent lease liability measurement?

A

Financial liability at amortised cost

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7
Q

What is depreciation for right-of-use asset based on?

A

Depreciation based on earlier of useful life and lease term

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8
Q

Lessor agreeing to reimburse is?

A

A lease incentive

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9
Q

Right-of-use asset initial double entry?

A

Debit Asset PV amount
Credit Liability PV amount

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10
Q

PV amount adjustments?

A

Add direct inital costs
Add Other direct costs (Initial payment)
Subtract incentives received

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11
Q

What is charged to SPL?

A

Interest + Depreciation charge

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12
Q

How should profit be treated in a sale and leaseback?

A

Recognise proportion relating to right-of-use transferred

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13
Q

Payment in arrears treatment?

A

Deducted from the present value

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14
Q

What goes in SFP?

A

Right-of-use
Lease liability

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15
Q

Calculate right-of-use asset for every year SFP?

A

Deduct depreciation from carrying value every year

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16
Q

What goes in SPL

A

Interest
Depreciation

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17
Q

How is depreciation calculated?

A

PV after adjustments / useful life

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18
Q

Short-term lease?

A

Payment * months covered/length of lease

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19
Q

Calculate liability in advance

A

present value (no cash payments) - annual lease payments + interest (SPL) = c/f (SFP)

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20
Q

How is non-current liability calculated?

A

b/f - current liability

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21
Q

When does a sale and leaseback transaction occur/

A

When seller transfers an asset to a buyer who then leases asset back to seller (lessee)

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22
Q

If transfer is not sale (seller-lessee)

A

Continue to recognise asset (at CV and then depreciate)
Recognise financial liability (= proceeds)

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23
Q

If transfer is not sale (buyer-lessor)

A

Do not recognise the asset
Recognise financial asset (= proceeds)

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24
Q

What is the company that sells the asset referred to as?

A

Seller-lessee. As whoever sells must lease it back

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25
Q

If transfer is sale (seller-lessee)

A

Derecognise the asset. Recognise sale at FV

Recognise lease liability (PV of lease rentals)

Recognise right-of-use asset (whjat it’s wroth based on proceeds received and what previous carrying value was)

Gain/loss transferred to buyer

26
Q

What does performance obligations not satisfied mean?

A

No sale

27
Q

What does performance obligations satisfied mean?

A

Sale

28
Q

Recording proceeds in a sale?

A

Debit Bank

29
Q

Derecognise asset in a sale?

A

Credit Asset (CV amount)

30
Q

Record liability in a sale?

A

Credit liability (PV amount)

31
Q

Right of use asset in a sale?

A

Proceeds - PV = Transferred (OPTIONAL)

Previous CV * (percentage of (PV/Proceeds))

32
Q

Gain/loss for SPL

A

(Proceeds - liability) - (Derecognise asset - right of use asset)

33
Q

If proceeds are less than fair value of asset or lease payments are less than market rental (below market terms)

A

Accounted for as a prepayment of lease payments

34
Q

If proceeds are less than fair value of asset or lease payments are less than market rental (above market terms)

A

Accounted for as additional financing provided to lessee

35
Q

Period for depreciating a right-of-use asset?

A

Commencement of lease to shorter of end of lease term and end of useful life for plant

36
Q

Lease liability included for one year?

A

PV + interest

37
Q

How are lease instalments accounted for?

A

As current liabilities

38
Q

What is meant by in arrears?

A

Payments are made at the end of the lease period. Subtracted from PV

39
Q

What is meant by in advance?

A

Payments are made at the start of the lease period. Subtracted from PV

40
Q

Calculate gain on rights retained?

A

Gain * (PV/Fair value)

41
Q

Calculate gain on rights transferred

A

Total gain - gain on rights retained

42
Q

What is done pro-rata

A

Interest
Depreciation

43
Q

Elements of lease

A

Right to control
Identified asset
Period of use

44
Q

Right of control in a lease characteristics?

A

Obtain substantially all economic benefits from an asset

45
Q

Identified asset in a lease characteristics?

A

A similar asset cannot be used as a substitiute for the original asset

46
Q

Period of use characteristics?

A

Lease may only be for a portion of contract’s term

47
Q

Right-of-use asset initial measurement?

A

Initial measurement + Payments made before or at commencement date - incentives received + Initial direct costs + PV costs of dismantling, removing and restoring site

48
Q

Control in right-of-use asset?

A

Substantially all economic benefits from identified asset use

49
Q

What represents short-term leases?

A

Leases under 12 months

50
Q

Equation if transaction is sale (rights retained) (sale and leaseback)

A

Carrying amount * (Present value of future lease payments/FV) = Gain relating to rights retained

51
Q

Calculation of total gain (sale and leaseback)

A

Fair value (=proceeds) - carrying amount

52
Q

Equation if transaction is sale (rights transferred) (sale and leaseback)

A

Total gain - rights retained

53
Q

Adjustment required to account for gain on sale in profit or loss?

A

Rights retained

54
Q

Amount of gain that can be recognised in profit or loss?

A

Rights transferred

55
Q

DEPRECIATION CHARGED TO?

A

STATEMENT OF PROFIT AND FUCKING LOSS

56
Q

Why do we add an extra year for a lease liability?

A

To calculate the current liability for the lease payment

57
Q

PVFLP

A

Present Value of Future Lease Payments

58
Q

Payment in advance treatment for a lease liability?

A

Included after (lease PV + finance cost) is determined. Is not included in carrying amount at

59
Q

Rights of use retained initial measurement?

A

Carrying amount * (PV/FV)

60
Q

Gain transferred to buyer initial measurement?

A

Total gain - gain relating to right-of-use retained

FV - CV - (FV - CV * (PV/FV). This is a gain on disposal

IAS & IFRS Standards Overview (73 decks)

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