Lease and non-lease components
A lessee generally allocates consideration to lease and non-lease components on a relative stand-alone price basis. IFRS 16 permits a lessee, by class of underlying asset, to elect a practical expedient to account for each lease component and associated non-lease components as a single lease component. Apply the appropriate separate requirements if the expedient is not used.
Worked example
A contract includes equipment rental and maintenance with stand-alone prices of $80 and $20. For $90 consideration, allocate $72 to the lease and $18 to maintenance if separation is required and no other factors affect allocation.
Common mistake
Assuming every service in a lease contract is automatically part of the lease liability, or applying the lessee’s practical expedient without considering the class election.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | SBR | Direct | September 2026–June 2027 |