IFRS 16Chapter 11Lesson 1
Lessor: finance leases
Step 1 of 7Learning objectives
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In a finance lease, the lessor no longer presents the leased asset but a receivable equal to its net investment in the lease. The lesson shows how to calculate that net investment, what changes for a manufacturer or dealer lessor (revenue, cost of sales, costs of obtaining the lease), then how finance income is spread at a constant rate and how IFRS 9 applies to the receivable.
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Learning objectives
- Calculate the net investment (lease payments receivable and unguaranteed residual value discounted at the implicit rate) and recognise the receivable.
- Calculate, for a manufacturer or dealer lessor, revenue, cost of sales and selling profit, and deal with its costs of obtaining the lease.
- Build the finance income schedule at a constant rate of return and record the annual entries.
- Identify how IFRS 9 applies to the net investment and the consequence of a fall in the unguaranteed residual value.