Under IFRS 16, a lease is a contract in which the lessor provides the right to use an underlying asset to a lessee for a period of time in exchange for consideration.
A lessor must assess:
Unlike lessees, lessors continue to distinguish between finance and operating leases.
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of the underlying asset.
Derecognition:
The lessor removes the underlying asset from the balance sheet.
Crates
Recognition of Net Investment:
The lessor recognizes a receivable equal to the net investment in the lease (present value of lease payments plus any unguaranteed residual value).
Income Recognition:
Finance income is recognized over the lease term using a pattern that reflects a constant periodic rate of return on the net investment.
A lease is classified as an operating lease if it does not transfer substantially all risks and rewards of ownership.
Asset Retention:
The underlying asset remains on the lessor’s balance sheet.
Depreciation:
The asset continues to be depreciated in accordance with applicable standards.
Income Recognition:
Lease income is recognized on a straight-line basis over the lease term (unless another systematic basis is more representative).