ARR C15 Leases

IFRS16

Asset treated as a lease if it meets definition of lease contract

• lessor is owner and supplier of the asset and lessee has right to use the underlying asset

Recognition

Lessor owns and supplies asset, lessee has right to use underlying asset

2 optional exceptions

Lease

Contract or part of contract that converys right to use an asset for period of time in exchange for consideration

UNderlying asset

Subject of a lease, which right to use that asset has been provided by lessor to lessee

Right of use asset

An asset that represents a lessee’s right to use an underlying asset for the lease term

Initial measurement

Dr Right of use asset

Cr Lease liability (PVFLP)

Cr Cash (Deposit/first installment/fees)

Cr Provisions (dismantling costs)

Right of use asset:

• Present value of future lease payments

• deposit

• first instalment if paid in advance

• initial direct costs

• fees

Depreciating the asset

Dr Depreciation expense

Cr Accumulated depreciation

Right of use asset should be depreciated over shorter of the lease term or asset’s useful life - includes secondary period if it is reasonably certain that lessee will exercise this option

Making the payment

Dr lease liability

Cr Cash

Comprises partly a repayment of capital and partly a finance charge for the period

Finance charge

Dr finance cost

Cr lease liability

Based on interest accrued over period based on interest rate implicit in lease