Leases

Question 1

What IFRS standard are leases?

Answer 1

IFRS 16

Question 2

What is a lease?

Answer 2

An agreement where the legal owner (lessor)
transfers the right to control the use of an asset to another party (lessee) in exchange for a series of payments over a period of
time

Question 3

List the 4 reasons an entity may lease and not buy

Answer 3

1) Leasing may be the only means of obtaining asset

2) Insufficient funds to purchase the asset

3) When only temporary use of asset is required

4) To avoid potential technological &
obsolescence factors

Question 4

At inception of a contract, an entity is required to assess whether the contract is, or contains a lease.

How is this done?

Answer 4

There must be:

1. Contract
2. Right to control the use of an identified asset
3. Right to direct the identified asset’s use
   to obtain substantially all the economic benefits