All contracts create rights and obligations for the parties to the contract. Lessee accounting in IFRS 16 considers the rights and obligations created by a lease from the perspective of the lessee. As discussed further in paragraphs BC105–BC126, a lease is defined as a ‘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’. The lessee accounting model in IFRS 16 reflects the economics of a lease because, at the commencement date, a lessee obtains the right to use an underlying asset for a period of time, and the lessor has delivered that right by making the asset available for use by the lessee. write down the Conceptual Framework concepts that the IASB used in these paragraphs to support its standard-setting decisions.

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 lease refers to a legal agreement between 2 parties, the lessor, who grants the right to use a specific asset for a predetermined period of time, and the lessee who gains the right to use the asset without having to purchase it outright.2 pointsTRUEFALSE

As per IFRS16- Lease under which of the following TWO circumstances “simplified accounting” method is used:- A. To short-term leases (i.e. with terms of 12 months or less and no purchase option) and To leases for which the underlying asset, when new, is “low value”. B. To long-term leases (i.e. with terms of more than 12 months) and to leases for which the underlying asset, when new, is “high value”. C. To short-term leases (i.e. with terms of 12 months or less and no purchase option) and to leases for which the underlying asset, when old, is “low value”. D. To short-term leases (i.e. with terms of 12 months or less and no purchase option) and to leases for which the underlying asset, when new, is “high value”.

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.

According to AASB 16 Leases a right-of-use asset is required to be. A depreciated over the lease term, where the cost of the right-of-use lease asset reflects that the lesseewill exercise the purchase option at end of the lease termo B depreciated over the underlying asset's useful life, where the cost of the lease asset reflects that thelessee will exercise the purchase option at end of the lease termo C depreciated over the longer of the lease term and its useful life of the right-of-use lease asset, wherethe lessee will not obtain ownership at the end of the lease termo D depreciated from lease commencement to the longer of the lease term and its useful life, only wherethe economic benefits to be realised from using the asset are for a period of greater than ten years