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International Accounting Standard (IAS) 17
Leases

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International Accounting Standard (IAS) 17

IAS 17

Leases

IAS 17 first issued in September 1982

IAS 17 revised in December 2003

Recent amendment: by IFRS 7 issued in August 2005

Classification of leases
(1) Finance lease
(2) Operating lease

Finance lease
--> the risks and rewards of ownership are transferred to lessee

Operating lease
--> all leases other than finance lease

Accounting for lessees

     (1) Finance lease
          --> fair value of leased property is
          --> recognized as assets and liabilities on the financial statements
          --> present value of minimum lease payments, if this amount is lower

     (2) Operating lease
          --> lease payments are
          --> recognized as an expense
          --> straight-line basis
          --> over the lease term

Accounting for lessors

     (1) Finance lease
          --> net investment in the lease is
          --> recognized as receivables

     (2) Operating lease
          --> lease income is
          --> recognized in income
          --> straight-line basis
          --> over the lease term

Net investment in the lease
      --> gross investment in the lease
      --> discounted
      --> at the interest rate implicit in the lease

Gross investment in the lease
      --> the aggregate of
            (1) minimum lease payments receivable
            (2) unguaranteed residual value

IAS 17 Technical Notes