IFRS 16-Leases - Phnom Penh HR

Objective

This Standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. The objective is to ensure that lessees and lessors provide relevant information in a manner that faithfully represents those transactions. This information gives a basis for users of financial statements to assess the effect that leases have on the financial position, financial performance and cash flows of an entity.

Scope

An entity shall apply this Standard to all leases, including leases of right-of-use assets in a sublease, except for:

leases to explore for or use minerals, oil, natural gas and similar nonregenerative resources;
leases of biological assets within the scope of IAS 41 Agriculture held by a lessee;
service concession arrangements within the scope of IFRIC 12 Service Concession Arrangements;
licences of intellectual property granted by a lessor within the scope of IFRS 15 Revenue from Contracts with Customers; and
rights held by a lessee under licensing agreements within the scope of IAS 38 Intangible Assets for such items as motion picture films, video recordings, plays, manuscripts, patents and copyrights

Recognition

lessee may elect not to apply the requirements in paragraphs 22–49 to:

short-term leases; and
leases for which the underlying asset is of low value (as described in paragraphs B3–B8).

At the commencement date, a lessee shall recognise a right-of-use asset and a lease liability.

Measurement

At the commencement date, a lessee shall measure the right-of-use asset at cost.

Defined terms

commencement date of the lease (commencement date) The date on which a lessor makes an underlying asset available for use by a lessee.

economic life Either the period over which an asset is expected to be economically usable by one or more users or the number of production or similar units expected to be obtained from an asset by one or more users.

effective date of the modification The date when both parties agree to a lease modification

fair value For the purpose of applying the lessor accounting requirements in this Standard, the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction

finance lease A lease that transfers substantially all the risks and rewards incidental to ownership of an underlying asset.

fixed payments Payments made by a lessee to a lessor for the right to use an underlying asset during the lease term, excluding variable lease payments.

gross investment in the lease The sum of: (a) the lease payments receivable by a lessor under a finance lease; and (b) any unguaranteed residual value accruing to the lessor

inception date of the lease (inception date) The earlier of the date of a lease agreement and the date of commitment by the parties to the principal terms and conditions of the lease.

initial direct costs Incremental costs of obtaining a lease that would not have been incurred if the lease had not been obtained, except for such costs incurred by a manufacturer or dealer lessor in connection with a finance lease.

interest rate implicit in the lease The rate of interest that causes the present value of

the lease payments and
the unguaranteed residual value to equal the sum of

the fair value of the underlying asset and
any initial direct costs of the lessor.

lease A contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration.

lease incentives Payments made by a lessor to a lessee associated with a lease, or the reimbursement or assumption by a lessor of costs of a lessee.

lease modification A change in the scope of a lease, or the consideration for a lease, that was not part of the original terms and conditions of the lease (for example, adding or terminating the right to use one or more underlying assets, or extending or shortening the contractual lease term).

lease payments Payments made by a lessee to a lessor relating to the right to use an underlying asset during the lease term, comprising the following:

fixed payments (including in-substance fixed payments ), less any lease incentives;
variable lease payments that depend on an index or a rate;
the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.

For the lessee, lease payments also include amounts expected to be payable by the lessee under residual value guarantees. Lease payments do not include payments allocated to non-lease components of a contract, unless the lessee elects to combine non-lease components with a lease component and to account for them as a single lease component.

lease term The non-cancellable period for which a lessee has the right to use an underlying asset, together with both: (a) periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; and (b) periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option.

lessee An entity that obtains the right to use an underlying asset for a period of time in exchange for consideration.

lessee’s incremental borrowing rate The rate of interest that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-ofuse asset in a similar economic environment.

lessor An entity that provides the right to use an underlying asset for a period of time in exchange for consideration.

net investment in the lease The gross investment in the lease discounted at the interest rate implicit in the lease.

operating lease A lease that does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset.

optional lease payments Payments to be made by a lessee to a lessor for the right to use an underlying asset during periods covered by an option to extend or terminate a lease that are not included in the lease term.

period of use The total period of time that an asset is used to fulfil a contract with a customer (including any non-consecutive periods of time).

residual value guarantee A guarantee made to a lessor by a party unrelated to the lessor that the value (or part of the value) of an underlying asset at the end of a lease will be at least a specified amount.

right-of-use asset An asset that represents a lessee’s right to use an underlying asset for the lease term.

short-term lease A lease that, at the commencement date, has a lease term of 12 months or less. A lease that contains a purchase option is not a short-term lease.

sublease A transaction for which an underlying asset is re-leased by a lessee (‘intermediate lessor’) to a third party, and the lease (‘head lease’) between the head lessor and lessee remains in effect.

underlying asset An asset that is the subject of a lease, for which the right to use that asset has been provided by a lessor to a lessee.

unearned finance income The difference between:

the gross investment in the lease; and
the net investment in the lease.

unguaranteed residual value That portion of the residual value of the underlying asset, the realisation of which by a lessor is not assured or is guaranteed solely by a party related to the lessor.

variable lease payments The portion of payments made by a lessee to a lessor for the right to use an underlying asset during the lease term that varies because of changes in facts or circumstances occurring after the commencement date, other than the passage of time.

Disclosure

The objective of the disclosures is for lessors to disclose information in the notes that, together with the information provided in the statement of financial position, statement of profit or loss and statement of cash flows, gives a basis for users of financial statements to assess the effect that leases have on the financial position, financial performance and cash flows of the lessor. Paragraphs 90–97 specify requirements on how to meet this objective.

A lessor shall disclose the following amounts for the reporting period:

for finance leases:

selling profit or loss;
finance income on the net investment in the lease; and
income relating to variable lease payments not included in the measurement of the net investment in the lease.

2. for operating leases, lease income, separately disclosing income relating to variable lease payments that do not depend on an index or a rate.