Home' A Plus Magazine : July 2013 Contents addition, a lessee and a lessor would include
payments to be made in optional periods
only if the lessee has a significant economic
incentive to exercise an option to extend the
lease, or not to exercise an option to termi-
nate the lease.
Entities would have the option of exclud-
ing leases that are classified as short-term
leases (i.e. a lease that has a maximum
possible term under the contract, including
any options to extend, of 12 months or less).
In this connection, a lessee may elect to
adopt an accounting policy to not apply the
requirements to recognize a right-of-use asset
or lease liability for the short-term lease.
Instead, the lessee may recognize the lease
payments in profit or loss on a straight-line
basis over the lease term. A lessor electing
to apply this accounting policy choice would
instead recognize the lease payments in
profit or loss over the lease term on either
a straight-line basis or another systematic
basis, if that basis is more representative of
the pattern in which income is earned from
the underlying asset.
This accounting policy election for short-
term leases would be made by class of under-
lying asset to which the right of use relates,
and this election would not be available for
leases that contain a purchase option.
On transition, a lessee and a lessor would
recognize and measure leases at the begin-
ning of the earliest period presented using
either a modified retrospective approach or a
full retrospective approach.
The Institute's financial reporting
standards committee is deliberating on the
proposals and will be preparing a submis-
sion to the IASB. In this connection, the
Institute welcomes comments on all matters
addressed in the exposure draft. Please pro-
vide your comments to Simon Riley, director
of standard setting, by 15 August.
Send your questions and comments to
email@example.com. The standard setting
team will answer these questions in accordance
with its policy, posted on the Institute's website.
July 2013 55
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