Leases

Question 1

Leases - IFRS 16

Answer 1

A contract that conveys a right to use for a period of time for exchange of consideration.

Identify
- Coveys a right to use.
- Obtain substantially all economic benefits
-Direct use of the asset
-Explicit
-Period of time - as long as we have control.

Question 2

Accounting for a Lease

Answer 2

Dr - Right to use Asset
Cr - Lease liability

Term - Periods covers + probable extended time.

Question 3

Subsequent measurement of Lease liability.

Answer 3

Arrears:

Y1: Bal b/f + Interest - Payment = Bal c/F

Advance

Y1: (Bal b/f - payment) + Interest = Bal c/f

Question 4

Depreciation of Lease

Answer 4

If the lease is due back after lease = UEL is the lease term

If the lease is transfers to an asset = UEL is the life of the asset.

Depreciate accordingly.

Question 5

Sale and Leaseback

Answer 5

When a company decided to sell an asset and lease it back to the buying entity.

De-recognise the asset:

Dr PL on sale of asset
Cr NCA

Recording the proceeds:
Dr Bank
Cr Profit/Loss on sale.

If not considered a genuine sale = Dr Bank Cr Loan - Treat as a liability.

Low value assets are recognised in the PL and not in the SFP.