Hello my accounting gods,
I came a cross a conflicting statement published by Deloitte on the criteria for recognizing the lease as a straight-line basis expenses rather than liability.
As per IFRS 16, paragraph 5 (ref :http://eifrs.ifrs.org/eifrs/bnstandards/en/IFRS16.pdf) :
"A lessee may elect not to apply the requirements in paragraphs 22–49 to:
(a) short-term leases; and
(b) leases for which the underlying asset is of low value (as described in
paragraphs B3–B8)"
However, as per Deloitte, 7.2.2.1
(ref: https://www.iasplus.com/en/publications/global/guides/ifrs-16):
"Note also that there is no restriction on qualification as a short-term lease based on
the value of the underlying asset or the amount of the consideration paid. The
exemption is available for high-value items that are leased for the short term."
Fellow tutor gods, please bestow me with enlightenment.
Yours sincerely,
Wei Jie
Ask the Tutor ACCA SBR
IFRS 16
6y ago#1Exam knowledge:
No need to capitalise any lease that is LESS THAN ONE YEAR or LOW VALUE
So you can take advantage of the exemption for a short lease where the asset has a high value
@virx said: Hello my accounting gods, I came a cross a conflicting statement published by Deloitte on the criteria for recognizing the lease as a straight-line basis expenses rather than liability. As per IFRS 16, paragraph 5 (ref :http://eifrs.ifrs.org/eifrs/bnstandards/en/IFRS16.pdf) : "A lessee may elect not to apply the requirements in paragraphs 22–49 to: (a) short-term leases; and (b) leases for which the underlying asset is of low value (as described in paragraphs B3–B8)" However, as per Deloitte, 7.2.2.1 (ref: https://www.iasplus.com/en/publications/global/guides/ifrs-16): "Note also that there is no restriction on qualification as a short-term lease based on the value of the underlying asset or the amount of the consideration paid. The exemption is available for high-value items that are leased for the short term." Fellow tutor gods, please bestow me with enlightenment. Yours sincerely, Wei JieMy question is in respect of the same exemption "as per question 23 of BPP Revision Kit in order to maintain liquidity, and operating profit covenant, company instead of going into 5 years lease term enter into short term lease of 6 contract each of 10 months, we need to explain the ethical implication of this?" even if we record its as a short term lease we need to book accrual and expense how could it be helpful for a company?
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