ifrs 16 exception for lessee Flashcards
what are some exception for lessee from ifrs 16
1.short term lease(less than 12 months)
2.low value asset( less than are equal to 5000$)
what are short term lease exception?
1.purchase option
what are low value item exception?
1.can give it on sublease
2. it is not low value item if, when it is new, its value was higher than 5000
if a person opt for short term lease for one asset,is it necessary to apply ifrs 16 for whole class?
yes
if a person opt for low value item for one asset,is it necessary to apply ifrs 16 for whole class?
no
what are main component of a lease
right of use asset
specific asset
lease term
lease payments
what is protective right
when use has some restriction,it does not mean lessee has no right of use asset
is there lease if lessor has substitution right?
yes if it has non substantive substitution right
what is specific asset
implicit explicit specific
what is not substantive substitution rigjht
when lessor is not practically able to substitute asset or it is not profitable for him to substitute asset
what is lease term?
non concellable period plus if lessee is reasonably certain to avail the option of extention period and to not avail the option of early exit option
how can we know that a lessee is reasonabally certain?
1.check terms and condition of contract
2.if lessee has made improvements to the asset
3.if there are heavy penalty on termination of lease
4.if the asset is very important for lessee
what will be the treatment of penalty on termination if lessee is reasonabally certain to avail early exit option
present value of penalty will be included in lease liablity and than it will be amortize till the end
what will we lessee use if IRR of lessor is not given?
lessee will use it incremental borrowing rate
what should a lessee used for depreciation of ROUA asset
useful life if 1. bargain purchase option
2.cumpolsary transfer occur
3.lessor will transfer asset at the end to
lessee
if not than lower of lease term or useful life
what is ROUA
PV OF ALL PAYMENTS TO ALL PARTIES LESSOR,3RD PARTY
What is lease payment
fixed rentals
in substance fixed rentals
varible rental due to index/rate
guaranteed contractual residual value if it is payment is expected
penalty on termination of lease
purchase option
what is treatment of contingent rental on performance of lessee
it will be expensed out when it is due
what is insubstance fixed rental
when there is no possiblity bof not occuring
when a lessee do reassesment of lease?
1.change in lease term
2.change in awailing or not availing of purchase option
3.change in rentals due to cpi or index
4.change in payment of guanranted residual value
in which cases a lessee will use new incremental borrowing rate and why while assesment?
1.change in lease term 2.change in availing of purchase option
reason is reassesment result in change in ecocnomic benifits
what is key assumption in reassesment of lease due change in rentals?
once lease payment are adjusted for change in cpi then it will assume to remain constant for remaining term
will we take into account of anticipated change in cpi for changre in rentals
no,we will only take into account chnage in rental due to actual change in cpi rate
