[IFRS 16:61], A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. The project would result in a replacement of IAS 17 Leases. the lease transfers ownership of the asset to the lessee by the end of the lease term, the lessee has the option to purchase the asset at a price which is expected to be sufficiently lower than fair value at the date the option becomes exercisable that, at the inception of the lease, it is reasonably certain that the option will be exercised, the lease term is for the major part of the economic life of the asset, even if title is not transferred, at the inception of the lease, the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset, the leased assets are of a specialised nature such that only the lessee can use them without major modifications being made. If any of the strands are damaged, the supplier is responsible for effecting any necessary repairs. For year ends 31 December 2019 and onwards, the long awaited new accounting standard regarding leases (NZ IFRS 16 Leases) comes into effect. Under IFRS 16, all leases, excluding those that meet the practical expedient for low-value and short-term leases, if elected, are treated as finance leases. If an entity chooses to apply this relief, then the new lease defintion will be applied to contracts entered into or modified on or after the date of intial application (1 January 2019 for calendar year end entities). A lessee can elect to apply IFRS 16 to leases of intangible assets, other than those items listed above. A low-value asset is not specifically defined in the standard and this will be a policy decision for management. The lease assets and liabilities are recognized on the statement of financial position, which may result in a significant increase in the amount of assets and liabilities many companies report. IFRS 16 is the new Accounting Standard for Leases, from the International Accounting Standards Board. [IFRS 16:C3], A lessee shall either apply IFRS 16 with full retrospective effect or alternatively not restate comparative information but recognise the cumulative effect of initially applying IFRS 16 as an adjustment to opening equity at the date of initial application. This communication contains a general overview of the topic and is current as of June 8, 2016. The timetable and quantity of goods stipulated are equivalent to the customer having the use of six rail cars for three years. The main reason is that under older standard IAS 17, you just accounted for operating leases straight in profit or loss as an expense. Per the new rules, all leases must be accounted for on your balance sheet. Companies need to assess whether their … Leases. IFRS 16 Leases was issued in January 2016 and applies to annual reporting periods beginning on or after January 1, 2019. Conversely, if the customer was entitled only to use an amount of capacity equivalent to five fibres within a cable made up of 15 strands, but not five specific strands, the contract would contain neither an identified asset nor a lease because the capacity represented by five fibres does not represent substantially all the capacity of the 15-strand cable. a capacity portion of a fibre optic cable) is not an identified asset, unless it represents substantially all the capacity such that the customer obtains substantially all the economic benefits from using the asset. IFRS 16 . 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