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IFRS replaces the following standards and interpretation.
* IAS Leases
* IFRIC4 Determination whether an Arrangement contains a Lease
* Sic Operating leases - incentives
* Sic Evaluating the Substance of Transactions involving the legal Form of a lease
The main objectives of IFRS is to establish principles for the recognition, measurement, presentation and disclosure of leases, with the objective of ensuring that lessees and lessors provide relevant information the faithfully represents those transactions.
Scope.
IFRS leases will apply to all leases, including subleases except for e.g leases of biological (IAS) and others mentioned by the standard.
Recognition exemptions.
A lessee may elect to account for lease payments as an expense on straight-line basis over the the lease term or another systematic basis for the following two types of leases: leases with a lase term of months or less and containing no purchase option and leases where the underlying asset has a low value when new.
Identifying a lease
Control is a key word here. A contract is a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Separating components of a contract.
F or a contract that contains a lease component and additional lease and non-lease components e.g lease of an asset, lessees will allocate the consideration payable on the basis of the relative stand- alone prices, which shall be estimated if observable prices are not readily available. Lessors shall allocate consideration in accordance with IFRS Revenue from Contracts with Customers.
Accounting by lessors
Lessors shall classify each lease as an operating lease or a finance lease
Sale and Leaseback transactions.
If an asset transfer satisfies IFRS 's requirements to be accounted for as a sale the seller shall measure the right-of-use asset at the proportion of the previous carrying amount that relates to the right of use retained. As such, the seller only recognises the amount of gain or loss that relates to the rights transferred to the buyer.
Disclosure requirements
The am here is to give a basis for users to assess the effect that leases have on the entity.
IASB announced the new leasing standard in January – it will comes into effect on1 January
