Wiley IFRS: Practical Implementation Guide and Workbook, 3rd Edition

Chapter 11

LEASES (IAS 17)

BACKGROUND AND INTRODUCTION

This Standard prescribes the accounting treatment for leases in the financial statements of lessees and lessors.

SCOPE

This Standard shall be applied in accounting for leases other than

1. Leases to explore for or use nonregenerative resources such as oil, natural gas, and so forth

2. Licensing arrangements for motion pictures, video recordings, music, and so on

This Standard shall not be applied in the measurement of

• Property held by lessees that is an investment property (see IAS 40)

• Investment property provided by lessors under operating leases (see IAS 40)

• Biological assets held by lessees under finance leases (see IAS 41)

• Biological assets provided by lessors under operating leases (see IAS 41)

DEFINITIONS OF KEY TERMS

(in accordance with IAS 17)

 

Lease. An agreement whereby the lessor conveys to the lessee in return for payment the right to use an asset for an agreed period of time.

Finance lease. A lease that transfers substantially all the risks and rewards of ownership of an asset. Title need not necessarily be eventually transferred.

Operating lease. A lease that is not a finance lease.

Minimum lease payments. The payments over the lease term that are required to be made. For a lessee, this includes any amounts guaranteed to be paid; for a lessor, this includes any residual value guaranteed to the lessor.

The definition of a lease includes those contracts for hire of an asset that contain provisions for the ...