Operating lease

This topic has 3 replies, 2 voices, and was last updated 4 years ago by Stephen Widberg.

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June 22, 2021 at 3:10 am #626020
rashard
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Hi,

In an operating lease arrangement, the lessor recognises income on a straight line basis over the lease term and it is mentioned that the underlying asset should depreciated based on IAS 16 PPE or IAS 38.
Is IAS 40 Investment property not applicable in this because the lessor holds the asset for earning rentals?
June 22, 2021 at 12:16 pm #626063
Stephen Widberg
Keymaster
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OL LESSOR

If it’s PPE – continue to recognise at PPE and depreciate and recognise rental income
If it’s IP – continue to recognise as IP (normally at FV with no depreciation) and recognise rental income

FL LESSOR

Recognise as Lease Receivable with finance income

(Don’t quote standard numbers in the exam (or here!) – it leads to confusion)
June 22, 2021 at 12:54 pm #626066
rashard
Participant
- Topics: 17
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Thank you so much.. BTW what if we quote a wrong standard number? Losing all marks?
June 23, 2021 at 4:40 pm #626166
Stephen Widberg
Keymaster
- Topics: 17
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You won’t lose marks – but, as I said, easiest not to quote numbers. Just explain the rules!
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