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IFRS 16 Leases

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › IFRS 16 Leases

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by P2-D2.
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  • Author
    Posts
  • September 26, 2017 at 11:17 am #408675
    mansoor
    Participant
    • Topics: 423
    • Replies: 541
    • ☆☆☆☆

    In the published article “IFRS 16”. Link below:

    https://www.accaglobal.com/gb/en/student/exam-support-resources/fundamentals-exams-study-resources/f7/technical-articles/ifrs16.html

    Please note that the link says F7, but it is also posted in P2.

    My question relates to example 2 (reproduced below)
    ——————————————————–
    Example – the right to direct the use of an asset
    A customer (C) enters into a contract with a road haulier (H) for the transportation of goods from London to Edinburgh on a specified truck. The truck is explicitly specified in the contract and H does not have substitution rights. The goods will occupy substantially all of the capacity of the truck. The contract specifies the goods to be transported on the truck and the dates of pickup and delivery.

    H operates and maintains the truck and is responsible for the safe delivery of the goods. C is prohibited from hiring another haulier to transport the goods or operating the truck itself.
    —————————————————-

    the conclusion is that this is not a lease.

    Now, the std says that a customer has the right to direct the use if EITHER

    1. customer has the right to direct how and for what purpose the asset is used throughout the its period of use

    or

    2. the relevant decisions about use are predetermined and the customer has the right to operate the asset throughout the period of use without the supplier having the right to change these operating conditions.

    Now, in this example, it seems that the relevant decisions about the use are predetermined (as per #2) so, IT SHD BE CLASSFIED AS A LEASE.

    Can u please explain what is wrong with my argument?

    Regards

    September 29, 2017 at 10:59 pm #409031
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7217
    • ☆☆☆☆☆

    Hi,

    I think you need to look at the notes and standard (para 9) to correct your understanding. It is a lease if if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Here we do not have control and hence there is no lease.

    To be honest, I don’t quite like how it has been phrased in the technical article. I think it makes it more complicated.

    Thanks

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