LEASING ACCOUNTING ACCORDING TO INTERNATIONAL REGULATIONS

IFRS 16 Leasing contracts:

According to IFRS 16, a lessor must classify each of its leases as either an operating lease or a finance lease.

A lease will be classified as a finance lease if it essentially transfers all the risks and rewards of ownership of an underlying asset.

A lease will be classified as an operational lease if it does not essentially pass on all the risks and rewards of ownership of an underlying asset.

The extent to which a leasing contract is a finance lease, or an operational lease depends on the substance of the transaction rather than the form of the contract.

Sxomples of situotious thot, iudividuollç or iu o reloted woç, would usuollç leod to the clossificotiou of o leose os o fiuouce leose ore:

1. the leasing contract transfers to the lessee the title to the underlying asset until the end of the term of the leasing contract;
2. the lessee has the option to purchase the underlying asset at a price that is expected to be sufficiently low relative to fair value on the date on which the option becomes exercisable that, on the date of initiation of the lease, there is reasonable certainty that the option will be exercised;
3. the duration of  the  leasing  contract  covers,  for  the  most  part,  the  economic  life  of  the underlying asset, even if the title deed is not transferred;
4. at the date of initiation of the lease agreement, the present value of the lease payments is at least equal to the entire fair value of the underlying asset; and
5. the underlying asset has such a specialized character that only the lessee can use it without major changes.

Aspects thot iudicote situotious thot, iudividuollç or reloted, moç olso leod to the clossificotiou of o leose os o fiuouce leose ore:

• if the lessee can terminate the leasing contract, the lessor’s losses generated by the termination of the contract are borne by the lessee;
• gains or losses resulting from changes in residual fair value are borne by the lessee (for example, in the form of a reduction in rent equivalent to most of the proceeds from the sale at the end of the lease); and
• The lessee has the ability to continue leasing for a second period, at a rent substantially lower than the market rent.