A lease that transfers

substantially all the risks

and rewards incidental to
ownership of an asset
wherein title may or may
not eventually be

Lease other than a finance

lease

Lessor
Derecognizes the
tangible asset (and
recognizes resultant
gain/loss)
Lessor recognizes a
receivable equal to the
net investment of the
lease
Leased asset not
recognized on the
statement of financial
position
Recognizes finance
income based on a

OPERATING LEASE
>If the sale price is at fair value, any excess
theamount
lessor,isconveys to
ofAgreement
sale proceedswhereby
over carrying
the lessee,
in return
for a payment or series
recognized
by the
lessor immediately
>Ifof
the
sale is below
fairright
value,to
any
profit/loss
payments,
the
use
an asset for
should be recognized
immediately
unless
the
an agreed
period of
time.
loss is in respect of future payments below
market value in which case it is deferred
>If the sale price is above market value, the
FINANCE
excess
of fair value is amortized over the
lease period
LEASE:

Definitio

Sale andLEASES
Leaseback
Classificat
PAS 17
Transactions
OPERATIN
G LEASE:

Treatment:

Lessee
Recognizes a leased asset on the
statement of financial position at
the lower of the fair value of the
leased asset and present value of
lease payments
Discount rate is the implicit rate
FINANCE
in the lease
Liability is recognized
Lease payments made are
apportioned between finance
charges and reduction of liability
The finance charge allocation is
allocated to a period to produce
constant rate of interest over the

FINANCE LEASE
Any excess of sale proceeds over
carrying amount is recognized by the
lessor over the lease term and not
immediately

Lessee
Lessor

Treats
contract as an
executory
contract

Retains
leased asset
OPERATING
on the
statement of
financial
position
Recognizes

lease income
on a straight

Treats
contract as an
executory
contract
Does not
recognize
leased asset
on the
statement of
financial
position
Recognizes
lease expense
on a straight