What is the conceptual basis for asset and liability recognition under the right-of-use approach used by...

What is the conceptual basis for asset and liability recognition under the right-of-use approach used by the lessee in a lease transaction?

Expert Solution

The conceptual basis for asset and liaility recognition under right of use approach used by lessee in lease transaction.

The asset will be measured at an amount of lease liability plus any direct cost incurred initially.
However, Once the lease begins, the lessee should use the cost model which can be arrived as follows

	Cost of asset	XXX
	Less : Depreication	XXX
	Less : Impairment losses	XXX
	Recognition of asset value	XXX

The liability will be recognised at present worth of lease payment to be made over a period of lease term.
Here, the discounted rate implicited in the lease should be used to arrive at present worth or value

The above accounting treatment is as per IFRS 16 : Leases. This IFRS is to be made effective from the period on or after January 1, 2019

ekkarill92 answered 1 year ago

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