CONFRAC REVIEWER
lessee as a finance lease under the new
Chapter 12- Lessee Accounting
1. Define a lease under the new lease
standard? (IFRS16)
-Under Appendix A, a lease is a contract or
part of a contract that conveys the right to
use the underlying asset for a period of
time in exchange for consideration.
- Appendix B9, to be a lease, a contract
must convey the right to control the use of
an identified asset.
-Appendix B13, an asset is typically
identified by being explicitly specified in a
contract or implicitly specified when made
available to customer.
2. Explain the right to control the use of an
underlying asset in a lease.
-Throughout the period of use, the customer
has the right to:
a. Obtain substantially all of the economic
benefits from the use of identified asset.
b. Direct use of the identified asset
3. Explain the finance lease model on the
part of the lessee.
-IFRS 16, paragraph 22, provides that at the
commencement date, a lessee shall
recognize a right of use asset and a lease
liability.
*All leases shall be accounted for by the
lease standard.*
4. Explain underlying asset, lessee, and
lessor.
Underlying Asset – subject of a lease for
which the right to use that asset has been
provided by the lessor to the lessee.
Lessee- the entity that obtains the right to
use an underlying asset for a period of time
in exchange for consideration
Lessor- entity that provides the right to use
an underlying asset for a period of time in
exchange for consideration
5. Explain the operating lease model in the
part of the lessee.
-a lessee may or may not apply the
operating lease accounting if the lease is
short-term or if the underlying asset is of
low value.
-If applied by lessee under the two
exemptions, the lessee shall recognize the
lease payments as an expense in either a
straight line basis over the lease term or
another systematic basis.
- Under the operating lease model, the
periodic rental is recognized as rent
expense on the part of lessee.
6. Explain a short-term lease.
- A lease that has a term of 12 months or
less at the commencement date of the
lease.
- If contains purchase option: NST
- Election for short-term lease shall be made
by class of underlying asset.
- Class of Underlying Asset is a grouping of
underlying assets of similar nature and use.
7. Explain a low value lease.
- New lease standard does not provide for a
quantitative threshold for low value asset.
- LVL is a matter of professional judgment.
- A lease of an underlying asset does not
qualify as a low value lease if the nature of
the asset is such that the asset is not of low
when new.
- IFRS 16, provides that the election for low
value lease is made on a lease by lease
basis.
8. Define a finance lease.
- A lease that transfers substantially all of
the risks and rewards incidental to
ownership of an underlying asset. **
-At the commencement date, the lessee
shall recognize a right of use asset and
lease liability.
9. Explain the initial measurement of a right
of use asset in a finance lease.

-Lessee shall measure the right of use asset

at cost at commencement date.

10. What are the components of the cost of

right of use asset?

a. The amount of initial measurement of the

lease liability or the present value of lease
payments

b. Lease payments made to the lessor at or

before commencement date, such as lease
bonus, less any lease incentives receive.

c. Initial direct costs incurred by the lessee.

d. Estimate of cost of dismantling, removing

and restoring the underlying asset for which
the lessee has a present obligation.

Lease incentives- payments by the lessor to

the lessee associated with a lease or the
reimbursement or assumption by the lessor
of the costs of the lessee.

11. Explain the treatment of the following:

a. Payment to lessor on or before

commencement date.

-Any incentive received shall be

deducted.

b. Lease Incentive

- should be deducted from