Underlying asset
The customer’s right to control use of an identified asset for a period in exchange for consideration is central to assessing whether a contract contains a lease. A lessee normally recognises a right-of-use asset and a lease liability subject to applicable recognition exemptions; the underlying physical asset remains conceptually distinct from the lessee’s right-of-use asset.
Worked example
A company leases a specified warehouse for five years and controls its use. The warehouse is the underlying asset; the lessee’s recognised right-of-use asset represents its right to use that warehouse over the lease term.
Common mistake
Treating the underlying asset itself as automatically owned and recognised by the lessee, or overlooking a supplier’s substantive substitution right when identifying the asset.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |