Bye PAS 17, Hello PFRS 16 ���

Bakit kailangan ng bagong lease standard?

Para maeliminate ang off-balance sheet financing.

Under PAS 17, ang lessee kasi eh kailangan nyang i-classify ang lease na finance lease or operating lease.

Kapag ang lease ay naclassify na operating, then lessee did not show neither asset nor liability in their
balance sheets – yung lease payment lang as an expense in profit or loss.

Pero, yung ibang operating lease eh non-cancellable, kaya they represented a liability (and an asset) for
the lessee.

Ang liability na ito eh nakahidden sa mga readers ng financial statements, at hindi sya nakapresent kahit
saang parte ng FS.

Oo nga pala, may mga disclosures sa notes to the financial statements na mandatory, pero sino bukod sa
mga auditor nagbabasa ng notes to the financial statements?

Tinanggal na ang discrepancy na ito sa PFRS 16 and puts most leases on balance sheet.

TIGNAN NATIN KUNG ANO MGA BINAGO

Sa PFRS 16 inintroduces ang bagong definition ng lease. Magkaganunman eh very similar pa rin siya sa
lumang definition in PAS 17 (differences do exist).
It means that when you actually accounted for some contracts as for lease contracts under PAS 17, you
will continue to do so also under the new standard (careful, methodology may change).

PERO!!! Kailangan mong maging careful pagdating sa service contracts. Bakit? Dahil nagprovide ng
detailed guidance ang PFRS 16 para madetermine kung ang contract mo ay lease contract or a service
contract (non-lease contract).

Under PAS 17, it did not matter so much whether you have an operating lease contract or a service
contract, for a very simple reason: you probably accounted for both types of contracts in the same way
(that is, as a simple expense in profit or loss).

Magkaganunman, ang accounting sa mga ibang types ng operating lease contracts ay dramatically ang
mga pagbabago, kailangan nating madistinguish kung meron tayong lease under PFRS 16 o ibang service
contract under different standard.

BIBIGYAN KO KAYO NG HALIMBAWA

Imaginin natin na gusto nyong magrent ng some space sa isang warehouse for storing your goods. Gusto
niyong pumasok sa 3-year rental contract. Nag-offer ang may-ari ng warehouse ng dalawang options
sa’yo:

Una, io-occupy mo ang certain area ng XY cubic meters, pero ung specific place will be determined by
the owner of the warehouse based on actual usage of the warehouse and free storage.

Pangalawa, io-occupy mo ang unit no. 13 ang XY cubic meters sa sector A ng nasabing warehouse. This
place is assigned to you and no one can change it during the duration of the contract.

Yung dalawang contracts eh parang lease contracts, and yes indeed. You would book the rental payments
an expense in profit or loss under PAS 17. But under PFRS 16, you need to assess whether these
contracts contain lease as defined in PFRS 16.
Ang una mong gagawin ay tignan kung ang underlying asset can be identified. If the asset can be
identified, there’s a lease. Otherwise, there is no lease.

Huwag na nating pahabain, the first contract does not contain any lease, because no asset can be
identified. The reason is that the supplier (warehouse owner) can exchange one place for another and
you lease only certain capacity. Therefore, you would account for rental payments as for expenses in
profit or loss.

The second contract does contain a lease, because an underlying asset can be identified– you are leasing
the unit no. 13 of XY cubic meters in the sector A. Therefore, you need to account for this contract as for
the lease and it means recognizing some asset and a liability in your balance sheet.

This was a very simplified illustration to make you aware of this and it’s by no means exhaustive – but
you get a point.

Babayaran lang ba natin yung sa lease, or pati ang ibang services?

Isa ito sa mga pagbabago sa PFRS 16 na kailangan nating malaman.

Kapag naglease ng some assets under ng operating lease (as called by PAS 17), in most cases, ang lessor
ang nagpoprovides sa’yo ng mga certain services tulad ng maintenance, repairs, cleaning, etc.

Under PAS 17,di mo na kailangang isipin ‘to masyado because put all lease payments as some rental
expense to your profit or loss. BUT, Under PFRS 16, you need to SPLIT the rental or lease payments into
lease element and non-lease element, because you need to:

1. Account for a lease element as for a lease under PFRS 16 (if it meets the criteria in PFRS 16); and

2. Account for a service element as before, in most cases as an expense in profit or loss.

Therefore, you need to split the payment into lease element and cleaning element based on their
relative stand-alone selling prices.
Ito ang malaking pagbabago: Lesee "do not need to classify the lease" at its inception and determine
whether it is finance lease or operating lease.

The reason is that PFRS 16 prescribes a "single model of accounting for every lease for the lessees".

In short, lessee needs to recognize a right-of-use asset and corresponding liability in its statement of
financial position.

And asset shall be depreciated and a liability amortized over the lease term.

This model is very similar to the accounting for finance leases under PAS 17 and you need to account for
operating leases in the same way.

There are 2 exceptions from this rule: First, lease of assets for less than 12 months (short-term leases).
And lastly, lease of assets of a low value (such as computers, furniture etc.). ���