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The video relating to NCA in particular to the motor vehicle(s) on the SFP for an amount of $200,000, purports that we need to establish whether the vehicles are owned in order to determine if they should be included in the SFP. However the vehicles may have been obtained by a finance lease using the criteria under IFRS 16, and therefore have “Control” as opposed to “Own” can you please clarify. Secondly does that also apply under GAAP if that is the case.
Regards,
David
Ownership is a financial statement assertion that relates to account balances; control is a criteria which is relevant to asset recognition when criteria are needed because it’s not otherwise obvious that an item is an asset. So ownership and control are two completely separate things. IFRS 16 Leases is NOT examinable in AA. Therefore, all assets included in PPE are most definitely not leased. This is consistent with IFRS 16 because under IFRS 16 it is NOT the underlying asset that is recognised, but the right to use the underlying asset (which is where control comes in). If criteria are met, the asset recognised is a “right-of-use asset” and this is shown separately in SoFP. By including such assets in SoFP management is asserting that they are owned (i.e. the rights are owned rather than the underlying asset).
(By the way, although not examinable in AA, please note that the term “finance lease” is obsolete for lessee accounting.)
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