Ch 6: IFRS 16 Leases
1. Identifying a lease
1-2 Q&A Capri Ice and Yardley Limited (ICAP Spring 2021) [O]
2. Definitions and Concepts
3. Accounting by lessee
3-7 Q&A Progress Limited [O]
Query: Sir in progress limited: The statement " interest rate was duly communicated to progress ltd" What dies this statement imply? And what if the rate was not communicated?
Response: It means the lessor has communicated "Interest rate implicit in the lease" to lessee and this rate should be used by lessee in calculation as it is known to lessee. When such rate is not known to lessee (i.e. if such rate was not communicated), the lessee uses "lessee's incremental borrowing rate" for calculation (see Q&A Dettol Limited and Lifebuoy Limited for such scenario).
Which rate should be used in various IFRS 16 situation? Watch this:
4. Accounting by lessor
4-1 Accounting by lessor [I]
Query: Sir below what percentage of life should a lease be classified as operating lease?
Response: No percentage specified in IFRS 16. Generally lease term less than 75% of economic life is considered operating lease.
5. Comprehensive Examples
5-2 Q&A French Vanilla Leasing Limited (ICAP Spring 2020) [I]
5-3 Q&A Dettol Limited and Lifebuoy Leasing Limited (ICAP Spring 2021) [I]
5-5 Q&A Fakhr Limited (ICAP Autumn 2020) [R]
Query: Far1 ka course far2 ke paper me ATA hai Kya. Far2 ke lease ke chapter me ye question diya hua hai. Jisme ias 40 and socie ka bhi Jiski practice nahi hai
Response: Yes. According to page 5 of CAF syllabus and Education Scheme 2021, Topics covered in testing level 1 will include the following: "All topics assessed at earlier stages of qualification."
Query: Sir is ma depreciation ko reverse Q kr rha ha ?? Kindly bta dn. Agr dereciation reverse ki ha to new depreciation charge nhi krga FV pr?
Response: Depreciation is NOT charged under fair value model applicable to IAS 40 Investment Property.
6. Objective Based Q&A
6-2 MCQs 16 to 25 [R]
Query: sir in mcq 23. what amount would be recorded as investment in lease if rentals are 1.8 million?
Response: Same Rs. 5,000,000 (since fair value would be lower than PV of lease payments using market rate of interest).
7. Additional Practice Q&A
7-1 Q&A Optimism Limited (ICAP Spring 2022) [I]
Query: Sir is mn jo urv find ki hy us main intrest rate 11 lya hy jb k mrket raye 12 hy to lessor k point of view sy 12 nae ln gy kiun k woh higher hy kindly agr bta dn
Response: There is no rule as to use higher rate. Interest rate implicit in the lease is used. We have a short video on which rate to be used in which situation in accordance with IFRS 16: Click here
7-2 Q&A Nonagan Leasing (ICAP Autumn 2022) [R]
Query: Point 2 ku consider kren gy wo to lesse sa related ha na extension
Response: This information is relevant to both. NL will use it from its own perspective for lease term.