IAS 17 Leases

International Accounting Standard 17

Overview of IAS 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  • Superseded by IFRS 16 Leases effective 1 January 2019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.

Articles about IAS 17

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