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Hello Mike.
Could you explain the ‘control part’ of IFRS 16?
What resource does the lessee control that enables him to capitalise lease payments as an asset?Thanks.
The lessee controls the asset – must be able to restrict access to and use of that asset
Has control over the revenues that that asset generates and is responsible for the upkeep and maintenance of that asset
Effectively, therefore, it is as though that asset is actually owned by the lessee
Imagine that you lease a car. Can the lessor have access to that car without your permission? Are you responsible for insuring that car? Are you able to dictate when and where that car should be driven? Then it seems that you have control over that resource (the car) and therefore it should be treated as though it were your asset … even though you are only a lessee
OK?
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