Difference between revisions of "IAS17"

Revision as of 00:02, 20 August 2020

IAS 17 Leases* classifies leases into two types: Finance Lease and Operating Lease. IAS 17 Leases* prescribes lessee and lessor accounting policies for the two types of leases, as well as disclosures.

For the Lessee:

Operating leases - Lease payments under an operating lease are recognised as an expense on a straight-line basis over the lease term unless another systematic basis is more representative of the time pattern of the user’s benefit.
Finance leases - At the commencement of the lease term, lessees recognize finance leases as assets and liabilities in their statements of financial position at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease.

Any initial direct costs of the lessee are added to the amount recognised as an asset. Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the periods in which they are incurred. A finance lease gives rise to depreciation expense for the recognised lease assets as well as finance expense for each accounting period.

For the lessor:

Operating leases -- Lessors present assets subject to operating leases in their statements of financial position according to the nature of the asset. Lessors depreciate the leased assets in accordance with IAS 16 and IAS 38. Lease income from operating leases is recognised in income on a straight-line basis over the lease term, unless another systematic basis is more representative of the time pattern in which the benefit derived from the leased asset is diminished.
Finance leases -- Lessors recognize assets held under a finance lease in their statements of financial position and present them as a receivable at an amount equal to the net investment in the lease. The recognition of finance income is based on a pattern reflecting a constant periodic rate of return on the lessor’s net investment in the finance lease. Manufacturer or dealer lessors recognize selling profit or loss in accordance with the policy followed by the entity for outright sales.

IAS 17 Leases* is Copyright: IFRS Foundation

* Superseded by IFRS 16 Leases.

Hierarchy

ID	Name	Level	x
IFRS	International Financial Reporting Standards	0	IFRS
IAS17	IAS 17 Leases*	1	IAS17

Term(s)

ID	Name	Clear	x
IAS40	IAS 40 Investment Property		IAS40
IFRS16	IFRS 16 Leases		IFRS16

IAS 17 Leases* International Financial Reporting Standards 10017 1 IAS, IFRS, Standard, Financial, Accounting, Leases, Operating Lease, Finance Lease IAS 17 prescribes lessee and lessor accounting policies and disclosure requirements for the two types of leases; Finance lease and Operating lease

@@ Line 1: / Line 1: @@
 <div class="alert-box secondary">Superseded by [[t:IFRS16]].</div>
-{{this}} classifies leases into two types:
+{{this}} classifies leases into two types: Finance Lease and Operating Lease. {{this}} prescribes lessee and lessor accounting policies for the two types of leases, as well as disclosures.
-* A finance lease if the lease transfers substantially all the risks and rewards incidental to ownership; and
-* An operating lease if the lease does not transfer substantially all the risks and rewards incidental to ownership.
-{{this}} prescribes lessee and lessor accounting policies for the two types of leases, as well as disclosures.
-Leases in the financial statements of lessees—operating leases
+For the Lessee:
-Lease payments under an operating lease are recognised as an expense on a straight-line basis over the lease term unless another systematic basis is more representative of the time pattern of the user’s benefit.
+* Operating leases - Lease payments under an operating lease are recognised as an expense on a straight-line basis over the lease term unless another systematic basis is more representative of the time pattern of the user’s benefit.
+* Finance leases - At the commencement of the lease term, lessees recognize finance leases as assets and liabilities in their statements of financial position at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease.
+Any initial direct costs of the lessee are added to the amount recognised as an asset. Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the periods in which they are incurred. A finance lease gives rise to depreciation expense for the recognised lease assets as well as finance expense for each accounting period.
-Leases in the financial statements of lessees—finance leases
+For the lessor:
-At the commencement of the lease term, lessees recognize finance leases as assets and liabilities in their statements of financial position at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease.
+* Operating leases -- Lessors present assets subject to operating leases in their statements of financial position according to the nature of the asset. Lessors depreciate the leased assets in accordance with IAS 16 and IAS 38. Lease income from operating leases is recognised in income on a straight-line basis over the lease term, unless another systematic basis is more representative of the time pattern in which the benefit derived from the leased asset is diminished.
+* Finance leases -- Lessors recognize assets held under a finance lease in their statements of financial position and present them as a receivable at an amount equal to the net investment in the lease. The recognition of finance income is based on a pattern reflecting a constant periodic rate of return on the lessor’s net investment in the finance lease. Manufacturer or dealer lessors recognize selling profit or loss in accordance with the policy followed by the entity for outright sales.
-Any initial direct costs of the lessee are added to the amount recognised as an asset. Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the periods in which they are incurred. A finance lease gives rise to depreciation expense for the recognised lease assets as well as finance expense for each accounting period.
-Leases in the financial statements of lessors—operating leases
-Lessors present assets subject to operating leases in their statements of financial position according to the nature of the asset. Lessors depreciate the leased assets in accordance with IAS 16 and IAS 38. Lease income from operating leases is recognised in income on a straight-line basis over the lease term, unless another systematic basis is more representative of the time pattern in which the benefit derived from the leased asset is diminished.
-Leases in the financial statements of lessors—finance leases
-Lessors recognize assets held under a finance lease in their statements of financial position and present them as a receivable at an amount equal to the net investment in the lease. The recognition of finance income is based on a pattern reflecting a constant periodic rate of return on the lessor’s net investment in the finance lease. Manufacturer or dealer lessors recognize selling profit or loss in accordance with the policy followed by the entity for outright sales.