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