Page 104 - Microsoft Word - 00 IWB ACCA F7.docx

Chapter 9

2.2 Subsequent measurement: liability

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

Dr Finance costs (SPL) 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

Unless another model is chosen, the cost model is used. The asset will be measured
at cost less accumulated depreciation and impairment losses.

The asset is depreciated:

 if ownership transfer to the lessee at the end of the lease, over the remaining
useful economic life of the asset

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

2.4 Short-life and low value assets

If the lease is short-term (less than 12 months at the inception date) or of a low value
then a simplified treatment is allowed.

In these cases, the lessee can choose to recognise the lease payments in profit or
loss on a straight line basis. No lease liability or right-of-use asset would therefore be
recognised.

98