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  • Lease Accounting

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    Natasha Nkurunziza
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    IFRS 16 requires lessees to recognize a right-of-use asset and corresponding liability on their statement of financial position for all leases with a term of more than one year. The asset will be depreciated and liability amortized over the lease term. A new asset class, right of use, must be created to account for these leased assets. For accounting entries, lessees debit the lease liability and interest while lessors debit long-term lease receivables and credit sundry receivables. Leases are classified as either operating or finance depending on criteria like lease term and fair asset value.

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    IFRS 16 requires lessees to recognize a right-of-use asset and corresponding liability on their statement of financial position for all leases with a term of more than one year. The asset will be depreciated and liability amortized over the lease term. A new asset class, right of use, must be created to account for these leased assets. For accounting entries, lessees debit the lease liability and interest while lessors debit long-term lease receivables and credit sundry receivables. Leases are classified as either operating or finance depending on criteria like lease term and fair asset value.

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    6 views1 page

    Lease Accounting

    Uploaded by

    Natasha Nkurunziza
    IFRS 16 requires lessees to recognize a right-of-use asset and corresponding liability on their statement of financial position for all leases with a term of more than one year. The asset will be depreciated and liability amortized over the lease term. A new asset class, right of use, must be created to account for these leased assets. For accounting entries, lessees debit the lease liability and interest while lessors debit long-term lease receivables and credit sundry receivables. Leases are classified as either operating or finance depending on criteria like lease term and fair asset value.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    IFRS 16 – Lease accounting

    Lessee needs to recognize a right-of-use asset and corresponding liability in its statement of financial


    position.

    An asset shall be depreciated, and a liability amortized over the lease term.

    Requires creation of new asset class – Right of Use (ROU)

    Accounting entries

    Lessee

    Dr – Lease Liability

    Dr – Lease interest

    Bank – Credit

    Lessor

    Dr – Long term lease receivable

    Cr – Sundry receivables

    Theres a finance lease and operating lease

    Operating lease – if the lease term is less than 1 year

    Finance lease – if the fair value at the end of the period is less than 20% (here the amount in the
    lease should be equal to the investment, as you are recovering the value of the asset)

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