IFRS-16

LEASES
Presented By : Ali Naqi

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 DEFINITION
A lease is a contract, or a part of a contract that conveys the right of
use of an asset (the underlying asset) for a period of time in
exchange for consideration.

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 DEFINITION
Lesso
Entity that provides the right to use an underlying
r asset in exchange for consideration.

Lessee
An entity that obtains the right to use an
underlying asset in exchange for consideration.

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 IFRS 16'S PURPOSE
The purpose of IFRS 16 is to establish guidelines for lease accounting and to ensure that
lessees disclose their lease transactions clearly and consistently. The main objectives of
IFRS 16 are to:
- Report lease transactions accurately and transparently
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- Provide a basis for financial statement users to

assess lease transaction cash flows
- Introduce a single lessee accounting model
- Recognize assets and liabilities for leases
longer than 12 months
- Increase transparency and comparability among
companies
 IFRS 16 DOES NOT
APPLY TO?
Leases to explore for / use it minerals, oils and other
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similar resources
Leases of biological assets (IAS 41)

Service concession arrangements (IFRIC 12)

Intellectual property licenses (IFRS 15)

Rights under licensing arrangements (IAS 38)

 TYPES OF LEASES
• Operating Lease

• Finance Lease

• Sale and Leaseback

• Sub leases

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 ACCOUNTING FOR
LESSEE
Lease Liability
- Filed payments
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- Amounts expected to be payable under residual value

guarantees
- Options to purchase the asset that are reasonably certain to
be exercised
- Termination penalties, if the lease term reflects the
expectation that these will be incur
 ACCOUNTING FOR
LESSEE
The Right of Use
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- The Asset
amount of the initial measurement of the lease liability
- Lease payments made at or before the commencement date
- Any initial direct costs
- The estimated costs of removing or dismantling the underlying
asset as per the conditions of the lease.
 SALE AND LEASEBACK
If The Transfer of Asset is a Sale:
SELLOR BUYER
(LESSEE)
Right of use asset at proportion (LESSOR)
Asset under applicable
of the previous carrying amount. standards.
Gain/loss related to the transfer Lease under IFRS 16.
right only.

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 SALE AND LEASEBACK
If The Transfer of Asset is Not a Sale:
SELLOR BUYER
(LESSEE)
Continues to recognize an asset. (LESSOR)
Financial Asset.(IFRS 9)

Financial Liability.(IFRS 9)

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CONCLUSION

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 ICMAP | 2024

THANK YOU
Presented By : Ali Naqi