20 years: Chartered accountant & educator
In the third part of this series, Saket provides an example to explain the application of the definition of lease in IFRS 16. It includes consideration of substantive vs protective rights in determining whether a contract is a lease.
In the third part of this series, Saket provides an example to explain the application of the definition of lease in IFRS 16. It includes consideration of substantive vs protective rights in determining whether a contract is a lease.
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4 mins 51 secs
In this video, Saket outlines two examples, first an oil company entering into a contract with a ship-owner, and secondly, where a coffee company enters into a contract with an airport operator. In both examples, whether the contract meets the definition of a lease is highlighted.
Key learning objectives:
Using the examples, identify what constitutes as an IFRS 16 Lease
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Using Example 1, Is the contract an IFRS 16 Lease, and if so, why?
Yes, this contract is an IFRS 16 Lease.
Example 2: A coffee company enters into a contract with an airport operator to use space in the airport to sell its goods for a three-year period. The coffee company is the customer and the airport operator is the supplier. The contract states the amount of space and that the space may be located at any one of several boarding areas within the airport.
The Supplier has the right to change the location of the space allocated to the Customer at any time during the period of use. There are minimal costs to the Supplier associated with changing the space for the Customer. The Customer uses a kiosk (that it owns) that can be moved easily to sell its goods. There are many areas in the airport that are available and that would meet the specifications for the space in the contract.
No, this contract is not an IFRS 16 Lease.
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