This accounting standard is quite comprehensive in its nature such that it encompasses different aspects of leases in a very detailed manner. This section briefly analyzes 1) Scope of IAS 17, 2) Classification of Leases, 3) Accounting by Lessor, 4) Accounting by Lessee, 5) Disclosure Requirements for Lessor and, 6) Disclosure Requirements for Lessee.
1. Scope of IAS 17
The applicability of IAS 17 rests with all the leased assets except the following assets:
• Natural regenerative resources including oil, gas and other minerals
• Licensing agreements in respect of videos, manuscript, copyrights, brands, films, games etc.
• Investment property valued on fair value basis by lessee under IAS 40
• Investment property considered as operating lease by the lessor under IAS40
• Biological assets considered as finance lease by the lessee under IAS 41
• Biological assets considered as operating lease by the lessor under IAS 41
2. Classification of Lease
Leases are generally classified into either finance lease or operating lease. The major distinguishing factor between a finance lease and an operating lease is the transfer of substantial risk and rewards even if the ownership is not transferred. It is important to note that the classification must be made before the commencement of the lease. The major criteria for the finance lease is as followed:
• At the expiry of the lease term, the ownership title is transferred to the lessee. ...