20 years: Chartered accountant & educator
In the final part of this series on IFRS 16, Saket provides examples to convey which lease contracts can qualify as being considered short-term.
In the final part of this series on IFRS 16, Saket provides examples to convey which lease contracts can qualify as being considered short-term.
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3 mins 56 secs
IFRS 16 offers two optional exemptions from recognition of right-of-use assets and lease liabilities. The first is an exemption from short-term leases, and the second is the exemption from leases of low value assets.
Key learning objectives:
Identify the two IFRS 16 exemptions, and explain why they are exempt
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No, the lease contract cannot be classified as a short-term lease.
Example 2: An entity leases a second hand car which has a market value of $3,500. The same car, when new, would cost $10,000.
No, the lease would not qualify for a low value asset because the car would not have been low in value when initially bought.
Example 3: A multinational bank with approximately £2 billion in profits enters into a five-year contract to lease an office. The annual lease cost is £15,000. The operations carried out from the office and the lease cost are immaterial to the bank.
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