International Financial Reporting Standards_guide.pdf

CHAPTER 14
Leases (IAS 17)
14.1 OBJECTIVE
Lease accounting is mainly concerned with the appropriate criteria for the recognition, as
well as the measurement, of the leased asset and liability from the perspectives of both a lessor
and lessee. Associated with this objective is the distinction between a finance lease (which
is recognized as an asset by the lessee and is depreciated) and an operating lease (which is
expensed by the lessee as the charges occur). Substance over legal form is imperative in lease
accounting as the legal form of lease transactions does not always coincide with its substance
and resulting accounting treatment.
14.2 SCOPE OF THE STANDARD
14.2.1 This standard should be applied in accounting for all leases other than:
■ leases to explore for or use minerals, oil, natural gas, and similar non-regenerative resources;
and
■ licensing agreements for such items as motion picture films, video recordings, plays,
manuscripts, patents, and copyrights.
However, this standard should also not be applied as the basis of measurement for:
■ property held by lessees that is accounted for as 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); or
■ biological assets provided by lessors under operating leases (see IAS 41).
14.2.2 The standard prescribes, for lessees and lessors, the appropriate accounting policies
and disclosure that should be applied to various types of lease transactions. It specifies the
criteria for distinguishing between finance leases and operating leases, the recognition and
measurement of the resulting assets and liabilities, as well as disclosures.
14.3 KEY CONCEPTS
14.3.1 A lease is an agreement whereby the lessor conveys to the lessee, in return for a
payment or series of payments, the right to use an asset for an agreed period of time.
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