Page 112 - SBR Integrated Workbook STUDENT S18-J19
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Chapter 8
3.5 Operating leases
A lessor recognises income from an operating lease on a straight line basis over the
lease term.
The underlying asset should be recognised and measured in accordance with IAS 16
Property, Plant and Equipment or IAS 38 Intangible Assets.
Example 7
Lessors – operating leases
Brick has a year end of 30 April 20X4. It owns technical equipment that it
leases out to other entities. On 1 November 20X3, Brick entered into a two
year lease in respect of equipment that, at the start of the reporting period,
had a carrying amount of $1m and a remaining useful economic life of ten
years. Brick is responsible for the asset’s insurance and maintenance. Annual
lease rentals are $300,000. The first receipt is due on 31 October 20X4. No
accounting entries have been posted in the reporting period in respect of the
equipment or the lease.
How will this be accounted for by Brick in the year ended 30 April 20X4?
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