Summary
Summary IFRS 16 - Lessor
- Course
- Financial Accounting 771
- Institution
- Stellenbosch University (SUN)
IFRS 16 Lessor summaries
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LessorClassification
Finance lease vs operating lease.
Finance lease: Risks and rewards substantially transferred.
Operating lease: Risks and rewards stay with lessor.
Indicators of a finance lease:
Ownership transfer at the end
Cheap option to purchase, certainty.
Lease term is major part of economic life – 75%
At inception, PV of LP is substantially equal to the FV of underlying asset.
Asset specialized for lessee
Lessee carries lessors losses if contract cancelled.
Substantially lower than market rent, will probably renew.
Fluctuating in FV of residual accrue to lessee.
Land and buildings:
Classify land and building separately.
Land usually unlimited life therefore operating lease usually
If 1 lease pmt for both split pmt based on relative FV (will be given)
If cannot reliably split entire lease = finance lease unless both land and
buildings is operating lease
If land immaterial = classify only the building.
Measurement
GIL – UIF = NIL
1. calculate the GIL
Installment (VAT inclusive) x n + GRV (excluding VAT) + UGRV (excluding VAT)
2. calculate the interest rate implicit
PV = Fair Value (Selling price, Including VAT) + Initial direct cost by Lessor
(excluding VAT)
*PV = the amount the lessor will lost, the amounts given up. If he sells the asset hê
will have to give up the asset and pay output VAT therefore the amount will be
inclusive of VAT and an outflow. In terms of the “initial direct costs” will the lessor be
able to claim back the input VAT that he spent on the initial direct costs and therefore
will the outflow in the PV only be the amount exclusive of VAT.
PMT = Vat inclusive
FV = GRV and UGRV both excluding VAT
3. calculate the NIL
4. calculate the UIF.
VAT
Credit installment agreement
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