Lease and non-lease components

Learning objectives

• Identify the lease and non-lease components of a contract, each separable right of use being a separate lease component.L2
• Calculate the lessee's allocation of the consideration between components on the basis of their relative stand-alone prices, or apply the practical expedient not to separate components by class of underlying asset.L2, L3

Normative references

• IFRS 16 §12For a contract that is, or contains, a lease, each lease component is accounted for as a lease separately from non-lease components, unless the lessee applies the practical expedient in paragraph 15. Guidance in B32-B33 helps identify the components.
• IFRS 16 §13The lessee allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.
• IFRS 16 §14The relative stand-alone price of components is determined on the basis of the price the lessor, or a similar supplier, would charge separately for that component or a similar one. If an observable stand-alone price is not readily available, the lessee estimates it, maximising the use of observable information.
• IFRS 16 §15The lessee may elect, by class of underlying asset, not to separate non-lease components and instead to account for each lease component and any associated non-lease components as a single lease component. This expedient does not apply to embedded derivatives that meet the criteria in paragraph 4.3.3 of IFRS 9.
• IFRS 16 §16Unless the practical expedient in paragraph 15 is applied, the lessee accounts for non-lease components applying other applicable standards.
• IFRS 16 §17For a contract that contains a lease component and one or more additional lease or non-lease components, the lessor allocates the consideration applying paragraphs 73 to 90 of IFRS 15. The non-separation expedient is not available to the lessor.
• IFRS 16 §B32The right to use an underlying asset is a separate lease component if the lessee can benefit from use of the asset either on its own or together with other resources that are readily available to it, and the asset is neither highly dependent on, nor highly interrelated with, the other underlying assets in the contract.
• IFRS 16 §B33A contract may include an amount payable by the lessee for activities and costs that do not transfer a good or service to it, such as administrative fees of the lessor; these do not give rise to a separate component and are part of the total consideration allocated to the separately identified components.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

13 questions

• Corvel, a lessee, enters into a five-year contract containing a lease of photocopiers and their maintenance by the lessor. It has not elected the practical expedient not to separate components for this class of assets. How does it account for the maintenance?L2
• In a single contract, Ferrand obtains from a lessor a tractor, a trailer that can be used with tractors readily available on the market, and a maintenance service for both vehicles. It also pays file fees that cover administrative tasks of the lessor and transfer no good or service to it. Which statements are correct? (several answers)L2
• Belcour, a lessee, is considering not separating the non-lease components of its vehicle leases. Which statement about this practical expedient is correct?L2
• Oriande, a lessor, makes available to Peyrac, a lessee, under a single four-year contract, an item of laboratory equipment and a calibration service. Peyrac has elected the practical expedient not to separate components for this class of assets. How does each of the two companies account for the consideration in the contract?L3
• Lantier, a lessee, enters into a contract that includes the lease of an industrial boiler and its maintenance. The lessor never sells maintenance separately, but several service providers on the market charge for similar maintenance. Lantier separates the components. How does it determine the stand-alone price of the maintenance?L3
• Dunval, a lessee, leases vehicles with a maintenance package and premises with a cleaning service. It elects the practical expedient not to separate components for the vehicles class, but not for the premises class. What is the effect of these elections?L3
• Brissac, a lessee, pays the lessor {annual_consideration} a year, in arrears (at the end of each year), for the lease of a packaging machine and its maintenance. The stand-alone prices are {ssp_lease} for the lease and {ssp_non_lease} for the maintenance. Brissac separates the components. What annual amount does it allocate to the lease component?L2
• The Aubrac firm pays each month, at the start of the month, {monthly_consideration} for a specified office floor and reception and security services provided by the lessor. The monthly stand-alone prices observed on the market are {ssp_space} for the offices and {ssp_services} for the services. Aubrac, a lessee, does not use the practical expedient. What portion of the monthly consideration goes to the lease component?L2
• The haulier Elvire, a lessee, pays {annual_consideration} a year, at the end of each year, for a specified heavy goods vehicle, its maintenance and the training of its drivers by the lessor. The stand-alone prices, based on the prices charged separately by similar suppliers, are: lease {ssp_lease}, maintenance {ssp_maintenance}, training {ssp_training}. Elvire separates the components. What annual amount does it allocate to the lease component?L3
• Vauclair, a lessee, pays each year, at the end of the year, {billed_amount} for the lease of a refrigerated warehouse and a technical monitoring service, plus {admin_fee} of administrative charges of the lessor, which transfer no good or service to it. The stand-alone prices are {ssp_lease} for the lease and {ssp_service} for the monitoring. Vauclair separates the components. What annual amount does it allocate to the lease component?L3
• A private hospital, the Sorbiers clinic, obtains from a lessor a specified medical scanner with a technical support service. It pays, at the start of each year, {billed_amount} for the scanner and the support, and {admin_fee} of file-keeping charges that remunerate internal tasks of the lessor without providing it with any good or service. Stand-alone prices: scanner {ssp_lease}, support {ssp_service}. The clinic, a lessee, does not apply the expedient not to separate components. Compute the annual consideration of the lease component.L3
• Batigra, a lessee, pays {annual_consideration} a year, at the end of each year, for a mobile crane, a flatbed truck and their maintenance, under a single contract. Batigra can benefit from each vehicle on its own, and neither is highly dependent on, or highly interrelated with, the other. Stand-alone prices: crane {ssp_crane}, truck {ssp_truck}, maintenance {ssp_maintenance}. Batigra separates the components. Compute the annual consideration allocated to each of the two lease components.L3
• The Lisandre printing works, a lessee, pays {annual_consideration} a year, at the start of each year, for an offset press, a folding machine and a technical support service provided by a single lessor. Each machine can be used on its own with readily available resources and neither is highly dependent on, or highly interrelated with, the other. Stand-alone prices: press {ssp_machine_a}, folding machine {ssp_machine_b}, support {ssp_service}. Determine the annual consideration of the press lease component and of the folding machine lease component.L3