Week 5.2: Leasing Flashcards
1
Q
How does IFRS 16 identify a lease?
A
A contract that conveys the right to use an asset for a period of time in exchange for consideration.
2
Q
Under which conditions is a lease not recognised and displayed as an expense?
A
- Less than 12 months, or
- Of low value
3
Q
Why might firms prefer to lease rather than purchase an asset?
A
- Cashflow management advantages
- Ability to conserve capital
- Flexibility of the asset base
4
Q
Under IFRS 16 what characteristics must a lease have?
A
1) An entity has the right to control the use of
2) Identify an aset
3) For a period of time
4) A consideration on it (e.g. payment)
5
Q
Is a lease extendable/ cancelable?
A
Yes
6
Q
How do you initially account for a lease- Lessee?
A
Recognise a right-of-use asset and a lease liability at the commence date in SOFP.
7
Q
A
