Page 89 - Microsoft Word - 00 P1 IW Prelims.docx

Leases

2.2 Subsequent measurement: liability

The liability is increased by the interest charge, which is also recorded in profit or
loss:

Dr Finance costs (P/L) X

Cr Lease liability X

Cash payments reduce the lease liability:

Dr Lease liability X

Cr Cash X

2.3 Subsequent measurement: right-of-use asset

Under the cost model, the asset will be measured at cost less accumulated
depreciation and impairment losses.

The asset is depreciated:

 over the shorter of the lease term and the useful economic life of the asset if
ownership does not transfer to the lessee

 over the useful economic life of the asset if ownership does transfer to the
lessee.

Illustrations and further practice

Now try TYU 4 from Chapter 7.

83