IFRS 16Chapter 3Lesson 1
Does a contract contain a lease?
Step 1 of 7Learning objectives
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Before any accounting, you must know whether a contract is, or contains, a lease: the customer must have the right to control the use of an identified asset for a period of time in exchange for consideration. The lesson breaks this test into three questions (identified asset, substantially all of the economic benefits, right to direct the use) and shows where judgement lies.
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Learning objectives
- Explain what a lease is under IFRS 16 and when this assessment is revisited.
- Determine whether there is an identified asset (designation, portion of capacity, supplier's substitution right).
- Assess whether the customer obtains substantially all of the economic benefits and directs the use of the asset.
- Apply a four-question reasoning and document the areas of judgement (predetermined decisions, asset designed by the customer).