ACCA AAA ^INT Syllabus D. Audit of Historical Financial Information - Leases - Introduction - Notes ^{18 / 41}

The double entry is:

Dr Right to Use Asset
Cr Lease Liability

What are the exceptions?

These payments are taken to the income statement - spread over the lease term

Please note this is a CHOICE - you can still put them to the SFP if you wish

1. Low Value Asset (less than $5,000)

   (You can choose some of these to go to the income statement and some to the SFP as normal leases - if you wish)

2. Short-Term Leases (less than 12 months)

   (You have to treat all classes of assets with short term leases the same way)

How is the Asset and Liability valued initially?

PV of all future lease payments basically...these include..

1. Fixed Payments

2. Variable payments (that vary with a rate/index, such as inflation)

3. Residual Value Guarantees

4. Options if they are expected to be taken up

What adjustments are then made to the asset initial value?

1. Add any initial direct costs

2. Add any obligated dismantling costs

3. Reduce by any Lease incentives received