Operating lease
A lessor retains the underlying asset and recognises lease payments as income on a straight-line or another systematic basis when that better represents how the benefit from use diminishes. It applies depreciation and impairment requirements to the asset. Lessees generally recognise a right-of-use asset and lease liability unless an applicable recognition exemption is elected; the lessor’s classification does not determine that lessee treatment.
Worked example
A lessor rents equipment for one year of its ten-year useful life, and the remaining facts show substantially all ownership risks and rewards are retained. It classifies the lease as operating and continues to recognise the equipment.
Common mistake
Assuming that a lessor’s operating lease means the lessee can omit a lease liability regardless of IFRS 16 exemptions.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Supporting | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |
