Page 154 - F2 Integrated Workbook STUDENT 2019

Chapter 6

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, the lessee can choose to ignore the right-of-use asset and lease liability.
Instead:

 Lease rentals are charged to the P/L on a systematic basis over the lease
term (typically straight line).

 Difference between amount in P/L and the cash payment is recognised as
a prepayment or accrual.

Dr Rental expense

Cr Cash

Cr/Dr Accrual/Prepayment

146