Section 15

LEASES

Prepared by:
Segura, Meryl
Senon, Jhoniza
Somogod, Ma. Sophia
 Lease is an agreement
whereby the lessor
conveys to the lessee in
return for payment or a
series of payments the A finance lease transfers

right to use an asset for an substantially all the risks

agreed period of time. and rewards incidental to

ownership. An operating
lease does not.
 INITIAL MEASUREMENT - LESSEE
Full PFRS PFRS for SMEs PFRS for Small Entities
• Finance Lease – lower • Finance Lease – lower • Operating Lease –
between fair value of between fair value of No distinction
the asset or the present the asset or the present between operating
value of the minimum
value of the minimum and finance lease.
lease payments.
lease payments. Recognize as
• Operating Lease –
• Operating Lease – includes additional expense in profit or
expensed on a straight- guidance on the loss
line basis over the lease treatment of an
term unless another operating lease by a
systematic basis is more lessee, where
representative of the payments payable to
use of the asset. the lessor are
structured to increase
with inflation.
 INITIAL MEASUREMENT - LESSOR
Full PFRS PFRS for SMEs PFRS for Small Entities
• Finance Lease – • Finance Lease – • Operating Lease –
recognize assets in recognize assets in No distinction
statement of financial statement of between operating
position as a financial position as and finance lease.
receivable equal to a receivable equal Recognize as
net investment in to net investment in income in profit or loss
lease. lease. in the period in which
• Operating Lease – • Operating Lease – they are EARNED.
recognized on a allows recognition
straight-line basis over of structured
the lease term, unless payments relating
another systematic to inflation.
basis is more
representative.
 INITIAL MEASUREMENT – SALE &
LEASEBACK
Full PFRS
• Finance Lease - the excess of
sale proceeds over carrying
amount is deferred and
amortized over the lease
term by the lessee.
• Operating Lease
- if the transaction was at
fair value, profit or loss is
recognized immediately.
- if sales price is below fair
value, profit or loss is recognized
immediately unless
compensated for by future
below market price payments,
which are deferred and
amortized.
- if the sale price was in
excess of fair value, the excess is
deferred and amortized.
PFRS for SMEs PFRS for Small Entities
• Finance Lease - the excess of
sale proceeds over carrying
amount is deferred and
amortized over the lease
term by the lessee.
• Operating Lease
- if the transaction was at
fair value, profit or loss is
recognized immediately.
- if sales price is below fair
value, profit or loss is recognized
immediately unless
compensated for by future
below market price payments,
which are deferred and
amortized.
- if the sale price was in
excess of fair value, the excess is
deferred and amortized.
SUBSEQUENT MEASUREMENT – LESSEE
Full PFRS PFRS for SMEs PFRS for Small Entities
• Finance Lease – • Finance Lease –
depreciated depreciated
over the shorter over the shorter
of the lease of the lease
term and the term and the
useful life of the useful life of the
asset. asset.
SUBSEQUENT MEASUREMENT – LESSOR
Full PFRS PFRS for SMEs PFRS for Small Entities
• Finance Lease – • Finance Lease –
finance income finance income
is allocated over is allocated over
lease term lease term
reflecting reflecting
constant constant
periodic rate of periodic rate of
return on lessor’s return on lessor’s
net investment. net investment.
 DERECOGNITION
Full PFRS
• Lease classification is • Lease classification is
made at inception of
the lease. If at any
time the lessee and
lessor agree to
change the provisions
of lease, other than
changes in
circumstances or
estimates, the revised
agreement is
regarded as new
agreement over its
term.
PFRS for SMEs PFRS for Small Entities
made at inception of
the lease. If at any
time the lessee and
lessor agree to
change the provisions
of lease, other than
changes in
circumstances or
estimates, the revised
agreement is
regarded as new
agreement over its
term.
END OF PRESENTATION
Thank you!