Which of the following BEST DESCRIBES the elements that should be considered when assessing whether a contract contains a lease arrangement under AASB 16 Leases? a) The underlying asset is clearly identified, the lessee has a right to control the underlying asset and is entitled to substantially all of the underlying asset’s economic benefits Correct! b) The underlying asset is clearly identified, the lessee has a right to control the use of underlying asset and is entitled to substantially all of the underlying asset’s economic benefits
Question
Which of the following BEST DESCRIBES the elements that should be considered when assessing whether a contract contains a lease arrangement under AASB 16 Leases? a) The underlying asset is clearly identified, the lessee has a right to control the underlying asset and is entitled to substantially all of the underlying asset’s economic benefits Correct! b) The underlying asset is clearly identified, the lessee has a right to control the use of underlying asset and is entitled to substantially all of the underlying asset’s economic benefits
Solution
The correct answer is b) The underlying asset is clearly identified, the lessee has a right to control the use of the underlying asset and is entitled to substantially all of the underlying asset’s economic benefits.
Here's why:
Under AASB 16 Leases, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The elements to consider when assessing whether a contract contains a lease arrangement under AASB 16 are:
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Identified Asset: The contract must involve the use of an identified asset. This means the asset must be either explicitly or implicitly specified in the contract and it should not have the ability to be substituted by the lessor.
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Right to Control the Use of the Identified Asset: The lessee has the right to control the use of the identified asset throughout the period of use. This means the lessee has both the right to obtain substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset.
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Entitlement to Economic Benefits: The lessee has the right to obtain substantially all of the economic benefits from the use of the identified asset throughout the period of use.
So, option b) correctly describes all these elements.
Similar Questions
Which of the following statements is correct in accordance with AASB 16 Leases?Group of answer choicesPayments that are made by a lessee at commencement date are included in the initial amount recognised for the lease liability.Payment for executory costs reimbursed by the lessee after being paid by the lessor on behalf of the lessee are included in the calculation of lease payments.A lease contract, or part of a lease contract, conveys the right to transfer ownership of an asset for a period of time in exchange for consideration.The variable portion of a lease payment is included only if the payment is dependent upon an index or rate, such as a consumer price index, a benchmark interest rate (e.g., LIBOR), or market rental rates
Which of the following statements is not correct in accordance with the requirements of AASB 16 Leases? Group of answer choices The commencement of the lease is the date from which the lessee is entitled to exercise its right to use the underlying asset. After initial recognition, right-of-use assets are depreciated. The lease liability recognised at the commencement of the lease term represents the present value of future lease payments. A right-of-use asset is required to be depreciated over the lease term, where the cost of the right-of-use lease asset reflects that the lessee will exercise the purchase option at end of the lease term.
AASB 16/IFRS 16 defines a lease as: Reading required: Learning objective 11.1 on page 318Group of answer choicesa contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration.a contract, or part of a contract, that conveys the right to transfer a liability for a period of time in exchange for an asset.a contract that conveys the right for the lessor to obtain substantially all of the economic benefits of the identified asset.a contract, or part of a contract, that conveys the right to transfer ownership of an asset (the underlying asset) for a period of time in exchange for consideration.
A lessee has the right to use an underlying asset during the lease term and an obligation to make payments to the lessor for providing the right to use that asset. The lessee also has an obligation to return the underlying asset in a specified condition to the lessor at the end of the lease term. The lessor has a right to receive payments from the lessee for providing the right to use the underlying asset. The lessor also retains rights associated with ownership of the underlying asset. write down the Conceptual Framework concepts that the IASB used in these paragraphs to support its standard-setting decisions.
a leasee’s initial measurement calculation for a right-of-use asset under AASB 16: Leases.
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