Low-value lease exemption
IFRS 16 provides separate optional exemptions for qualifying short-term leases and leases of low-value underlying assets. Evaluate the value of the underlying asset when new and the other applicable conditions; the low-value election is available on a lease-by-lease basis. If the exemption is applied, the lessee recognises lease payments as an expense on a straight-line basis or another systematic basis where appropriate. A low-value asset may qualify even when the lease lasts more than twelve months.
Worked example
A small standalone office printer is leased for three years. If it qualifies as a low-value underlying asset and the entity elects the exemption, it recognises the lease payments as an expense instead of recognising a right-of-use asset and lease liability for that lease.
Common mistake
Assuming the low-value exemption is restricted to a term of twelve months or less; the short-term and low-value exemptions are distinct.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |