IAS 17 – LEASES by StuartSpruce


									IAS 17 – LEASES.....................................................................................66
  COMPARISON TO PREVIOUS IAS 17 .....................................................66


            Details                     Current IAS 17                    Previous IAS 17

Initial direct costs –           Incremental costs that are         Previously, there was no such
definition                       directly attributable to           definition.
                                 negotiating and arranging a
                                 lease, except for such costs
                                 incurred by manufacturer or
                                 dealer lessors.
Initial direct costs –           Included in the initial            Previously there was a choice
accounting                       measurement of the lease           to either expense
                                 receivable and therefore           immediately or allocated
                                 allocated over the lease term.     over the lease term.
Interest rate implicit in the    Discount rate that, at             Did not specify that the
lease – definition               inception of the lease, causes     initial direct costs of the
                                 the present value of (the          lessor should be included in
                                 minimum lease payments +           this calculation.
                                 the unguaranteed residual
                                 value) to = the sum of (the
                                 fair value of the leased asset
                                 + any initial direct costs of
                                 the lessor).
Inception of the lease vs        Distinguishes between the          No specific guidance nor
commencement of the lease        inception of a lease (when         definition of commencement
term                             the lease is classified) and the   of the lease term
                                 commencement of the lease
                                 term (when recognition takes
Adjustments to lease             The effects of such changes        No guidance.
payments between the date of     are deemed to take place at
the inception of the lease and   the inception of the lease.
the date of the
commencement of the lease
Classification of lease          The indicators used to assess      No guidance.
                                 classification are not always
                                 conclusive. Therefore, if it is
                                 clear that substantially all of
                                 the risks and rewards of
                                 ownership are not transferred
                                 to the lessee, the lease is
                                 classified as an operating

                                                   IAS 17 2003 comparison to previous IAS 17
                                                                              Page 66 of 192
IAS 17 – LEASES (continued)


           Details                    Current IAS 17                  Previous IAS 17

Leases of investment         If an interest in property is      An operating lease could not
property classified as an    classified as an operating         previous be treated as
operating lease              lease and meets the definition     investment property and
                             of investment property in          therefore was accounted for
                             accordance with IAS 40, that       in the same way as all
                             lease should be accounted for      operating leases.
                             as a finance lease. In
                             addition, the fair value model
                             is used for the asset
Land and building elements   • Should be assessed               No specific guidance.
                                  separately for the
                                  purposes of lease
                             • The land element is
                                  normally classified as an
                                  operating lease unless
                                  title passes to lessee by
                                  end of lease term.
                             • The building element is
                                  classified as operating or
                                  finance lease in
                                  accordance with
                                  guidance outlined for all
                             • Minimum lease
                                  payments are allocated
                                  between land and
                                  building elements in
                                  proportion to relative fair
                                  values of the leasehold
                                  interests in the land
                                  element and the building
                                  element at inception of
                                  the lease.


IAS 40 Investment Property (AC 135)

                                               IAS 17 2003 comparison to previous IAS 17
                                                                          Page 67 of 192

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