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IFRS 16- leases example based summary
Financial accounting 300 (University of Pretoria)
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IFRS 16- Leases
Lessor
Incidental lessor
Classification of leases (61)
- Finance lease
- Operating lease
1. Finance lease (63)
- Ownership transfers to lessee at end of lease term
- Option to purchase at price lower than FV
- Lease term = major part of economic life
- PV = FV at inception date
- Only lessee can use asset without major modification
Additional indicators
- If lessee cancels lease - losses by lessor due to cancellation are borne by the
lessee AND
- Changes in the fair value of the residual value accrues to the lessee AND
- lessee can extend the initial lease term for a secondary period at a rent that is
substantially lower than market related rentals
*If above criteria not met then lease is operating lease
Measurement and Recognition
Initial measurement
Lessor
n Non-cancellable lease period (consider option to extend/terminate)
PMT Fixed/variable/in substance fixed (only lease component)
FV guaranteed +
unguaranteed residual value or
balloon payment or
purchase option
PV fair value at commencement date+
initial direct costs of the lessor +
lease incentives and reimbursed costs –
deposits;
i ?
Downloaded by Lexi Claasen ()
IFRS 16- leases example based summary
Financial accounting 300 (University of Pretoria)
StuDocu is not sponsored or endorsed by any college or university
Downloaded by Lexi Claasen ()
, lOMoARcPSD|8949379
IFRS 16- Leases
Lessor
Incidental lessor
Classification of leases (61)
- Finance lease
- Operating lease
1. Finance lease (63)
- Ownership transfers to lessee at end of lease term
- Option to purchase at price lower than FV
- Lease term = major part of economic life
- PV = FV at inception date
- Only lessee can use asset without major modification
Additional indicators
- If lessee cancels lease - losses by lessor due to cancellation are borne by the
lessee AND
- Changes in the fair value of the residual value accrues to the lessee AND
- lessee can extend the initial lease term for a secondary period at a rent that is
substantially lower than market related rentals
*If above criteria not met then lease is operating lease
Measurement and Recognition
Initial measurement
Lessor
n Non-cancellable lease period (consider option to extend/terminate)
PMT Fixed/variable/in substance fixed (only lease component)
FV guaranteed +
unguaranteed residual value or
balloon payment or
purchase option
PV fair value at commencement date+
initial direct costs of the lessor +
lease incentives and reimbursed costs –
deposits;
i ?
Downloaded by Lexi Claasen ()
