key vocabulary:
identification
measurement
lease accounting:
the right-of-use asset
liability
lessor: the entity that provide the right od use an underlying asset in exchange for consideration
leasee: the right to use an underlying asset in exchange for consideration
sale and leaseback
lease: is a contract that convert the right of use an underlying asset for a period of time in exchange for consideration
transaction
remeasurement
lessor accounting
net investment
technicial content
IFRS 16 :
a contract contains a lease if it conveys the 'right of control the use an identification asset for a period of time in exchange for aconsideration'.
the customer has the right to:
- substantially all of the identification asset's economic benefits
- direct the identification asset's use.
lease accounting:
commencement of the lease:
- establish the length of the lease
- liability
- recgnize the right-of -use asset
length of lease term:
- non-cancellable period
- option to exted if resonablely certain
- option to terminal the term idf reasonable certain
lease liability:
PV: (discounted
- fixed yearly payment
- amount expected to be paid under residual value guarantee
- optioms to purchase that are reasonablely certain to be exercised
- termination penalties if expected to be iccured
recognized right -of -use asset
cost:
- initial value of lease liability
- payment made at or before commencement
- initial direct cost
- estimated cost of asset removal or dismantling as per lease condition
inception: at the start of..
key conception: 1. convey the right to control the use
2. identified asset
3. for a period of time
in exchange for consideration
substantially all of the identified asset's economic benefit
accoutn tratement of leasee account:
Dr right of use asset X
Cr lease liability:
each year :
interests:
Dr financial cost X
Cr lease liability X
rent payment:
Dr Lease liability X
Cr Cash X
depreciation:
Dr Depreciation charge X
Cr Accumulated depreciation X
account tratement of leasor account:
Net Investment payment:
fixed payments
index of rate dependent variable payment at commercement date
residual value guarantees
unguranteed residual value
purchase option price
termination penalty
account tratement of leasor for operating lease
DR depreciation X
CR Accumulated depreciation X
DR accrual income X
CR rental income X
Account tratement of sale and lease back:
financial lease
leasee(seller)
continue to recognize the asset
recognize a fiancial liability equal to the transfer proceeds(sell consideration)
leasor(buyer)
recognize a financial asset equal to the transfer proceeds
operation lease
leasee (seller)
Derecognize the asset
Recognize a right -to- use asset (BV*PV of lease liability/FV of the asset)
recognize a lease liability
P/L
leasor(buyer)
recognize the asset
financial lease tratement
operating lease tratement
