IFRS 16 - Leases

Question 1

Under IFRS 16, when does a contract contain a lease?

Answer 1

A contract 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

(IFRS 16) To have control, the contract must give the customer the right, throughout the period of use, to:

Answer 2

1. Substantially all of the identified assets economic benefits
2. Direct the identified asset’s use

Question 3

When can it be concluded that the customer has a “right to use” an identifiable asset?

Answer 3

When the asset can be substituted, but the supplier is unlikely to benefit from this due to the costs incurred

Question 4

How should a contract containing a lease be recognised?

Answer 4

A LEASE LIABILITY should be recognised on the commencement of the lease (at present value of the payments to be made)
A RIGHT OF USE ASSET should be recognised for the same value, plus any associated direct costs