Recognition at the commencement date

Learning objectives

• Explain that at the commencement date the lessee recognises a right-of-use asset and a lease liability, except where the exemptions apply.L1
• Record the lessee's initial entry for a lease.L1, L2

Normative references

• IFRS 16 §22At the commencement date, the lessee recognises a right-of-use asset and a lease liability.

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

16 questions

• The inception date of the lease is the date on which the lessee recognises the right-of-use asset and the lease liability.L1
• On 1 February 20X2, Grutia and the lessor Dalvia commit to the principal terms of a lease of a crane (inception date). Dalvia makes the crane available to Grutia on 1 May 20X2 (commencement date). On which dates does Dalvia classify the lease and Grutia recognise the right-of-use asset and the lease liability?L2
• Under IFRS 16, the lessee classifies each of its leases as an operating lease or a finance lease, and recognises a right-of-use asset only for the latter.L1
• Which of the following operations take place at the commencement date of the lease, and not at the inception date? (several answers)L2
• At the commencement date of a lease that is not exempt, the lessee recognises a right-of-use asset and a lease liability.L1
• Estaing leases premises for 6 years; no exemption applies. It records nothing at the commencement date and expenses each lease payment when paid. This treatment complies with IFRS 16.L1
• Morvalis leases a packaging line for 5 years; the lease does not qualify for any exemption. What does Morvalis recognise at the commencement date?L1
• For Thalassa's lease of a warehouse, the inception date of the lease is 1 March 20X1, the commencement date is 1 June 20X1 and the first lease payment is made on 30 June 20X1. Thalassa's reporting date is 31 December 20X1. On which date does Thalassa recognise the right-of-use asset and the lease liability?L2
• Which of the following statements on recognition by the lessee at the commencement date are correct? (several answers)L2
• Valcrose leases 40 tablets for its sales staff. The lease is of low-value assets and Valcrose has elected the corresponding exemption. What does it recognise at the commencement date?L2
• Since Orbelle is not the legal owner of the truck it leases, it cannot recognise any asset at the commencement date of the lease; it merely provides a disclosure in the notes.L1
• Belcombe leases a warehouse for 5 years from 1 January 20X1, the commencement date. Annual lease payments of 60,000 are made at the end of each year. The present value of those payments at the incremental borrowing rate of 6.5%, rounded to the nearest euro, is {lease_liability}. No payment is made at or before the commencement date; there are no initial direct costs, no lease incentives and no restoration obligation. Record the entry at the commencement date.L1
• The Aubrive group leases a fleet of delivery vehicles for 3 years; the commencement date is 1 April 20X1. Monthly lease payments of {monthly_payment} are made in arrears, the first on 30 April 20X1. The finance department measures the present value of the lease payments not yet paid at {lease_liability}. There are no initial direct costs, lease incentives or restoration costs to consider. Record the entry on 1 April 20X1.L2
• Corbières leases an office building for 5 years. Annual lease payments of {annual_payment} are payable in advance; the first is paid at the commencement date. The present value of the 4 remaining payments, at the incremental borrowing rate of 4% and rounded to the nearest euro, is {pv_remaining_payments}. There are no initial direct costs, no lease incentives and no restoration costs. Record the entry at the commencement date.L2
• Kerlouan, a coffee roaster, leases a sales kiosk in a railway station for 15 months, through 5 quarters each payable at the start of the quarter; the quarterly payment is {quarterly_payment} and the first is paid on the day the kiosk is made available, the commencement date. The 4 remaining quarterly payments, discounted at the incremental borrowing rate of 2% per quarter, amount to {pv_remaining_payments} (rounded to the nearest euro). No other element enters the cost. Record the entry at the commencement date.L2
• Dunières leases a workshop; lease payments are made in arrears and their present value at the commencement date is {lease_liability}. At the commencement date, Dunières pays an intermediary a commission of {initial_direct_costs}, which, according to the case data, is an initial direct cost of the lease. There are no lease incentives and no restoration costs. Record the entry at the commencement date.L2