KLiPs - IFRS 16: Leases

IFRS 16: Leases - KLiPs

There are two segments in this KLiPs:
1) Accounting for Lessee, and

2) Accounting for Lessor

Within each of these segments, there are sub-segments, giving you more information on the subject.


A lessee shall measure the right-of-use asset at cost.

The cost of the right-of-use asset shall comprise:

(i) The amount of the initial measurement of the lease liability

(ii) Any lease payments made, less any lease incentives received

(iii) Any initial direct costs incurred by the lessee, and

(iv) Dismantling costs

There are two sub-segments under measurement of accounting for lessee:

a) Cost measurement model
To apply a cost model, a lessee shall measure the right-of-use asset at cost, less any accumulated depreciation and any accumulated impairment losses and adjusted for any remeasurement of the lease liability.

b) Other measurement models

If a lessee applies the fair value model in IAS 40 Investment Property to its investment property, the lessee shall also apply that fair value model to right-of-use assets that meet the definition of investment property in IAS 40. If right-of-use assets relate to a class of property, plant and equipment to which the lessee applies the revaluation model in IAS 16, a lessee may elect to apply that revaluation model to all of the right-of-use assets that relate to that class of property, plant and equipment.


There are two sub-segments in accounting for Lessors.

  1. Finance leases
    Finance lease income is recognized over the period of the lease to reflect a constant periodic rate of return. The underlying asset is de-recognized and a receivable is recognized instead.
  2. Operating leases
    Operating lease income is recognized on a straight-line basis over the lease term. The underlying asset is presented in the statement of financial position ie: the balance sheet.



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