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Leases

Finance Leases

1.1 Definition of a finance lease

As per IAS 17 Leases, a finance lease is any lease where the risks
and rewards transfer to the lessee

1.2 Indicators of a finance lease

As per IAS 17 Leases, indicators of a finance lease are:

 Legal title is transferred to the lessee at the end of the lease.

 The lessee has the option to purchase the asset for a price
substantially below FV.

 The lease term is the majority of the economic lifetime.

 The present value of the minimum lease payments amounts to
substantially all of the FV of the asset.

 The asset is highly specialised so that only the lessee can use
the asset without major modification.

 The lessee bears losses from cancelling the lease.

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