International Accounting Standard 17

• Issued: in 1982; re-issued in 1997 and 2003, followed by amendments
• Effective date: 1 January 2005
• Superseded by IFRS 16 Leases effective 1 January 2019
• What it does:
  • It defines lease-related terms , such as lease, finance lease, operating lease, minimum lease payments, interest rate implicit in the lease, guaranteed and unguaranteed residual value, etc.;
  • It classifies the lease as finance or operating and specifies 5 situations when the lease is normally classified as finance:
    1. Transfer of ownership of the asset;
    2. Option to purchase the asset at a price lower than the fair value;
    3. The lease term is for the major part of the economic life of the asset;
    4. At the inception, the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset;
    5. The lease assets are of a specialized nature

    IAS 17 names also further 3 indicators that lead to the lease being classified as a finance lease.

  • It outlines the rules for presenting the leases in the financial statements of both lessees and lessors;
  • It prescribes the rules for presenting the sale and leaseback transactions and provides illustrative examples in its implementation guidance.

• Summary of IAS 17 Leases
• IFRS 16 vs. IAS 17: How the Lease Accounting Changed - you can find the summary of the main changes and simple illustrative example here
• Troubles with IFRS 16 Leases - this article outlines the main implementation challenges when adopting IFRS 16
• How to Calculate the Interest Rate Implicit in the Lease

• Can you capitalize the rental expenses related to the land?

See more questions in IFRS 16 resources.

• IFRS Kit - learn IFRS in 130+ videos, 140+ excel case studies, quizzes, certificates
• IFRS Refresher Modules - interactive text-based training in individual IFRS with the feedback from real tutors
• IFRS Enabler - systematical interactive IFRS training for corporate teams
• my Helpline - get answers to your specific IFRS and other questions from more than 50 top consultants + fully searchable IFRS database as a bonus

CLICK HERE to see a complete catalogue of our courses.