The contract contains a lease, even though the clause of not transporting explosives is there, I would think that there should be some exceptions to things or events that will be harmful to both life and property. This video is really educative and simplified please do more on other standards
Thanks for your comment Henrietta! Yes you are spot on. I shared the analysis on Quora 👉🏾ifrsiseasy.quora.com/Identifying-a-lease-under-IFRS-16-Can-you-solve-this-1?ch=10&oid=361573111&share=c988f958&srid=33i0u&target_type=answer
Nice content Emeritus👍. The scenario would have qualified as a lease if not for the clause by the freight operator on the transportation of explosives.
Thank you for your comments Tommy Keys! Yes it's true that the clause creates a question of whether Mary truly has a lease or not. However, IFRS 16 allows for some exceptions to the rule. This exception is referred to as protective rights. When a contract clause created by the leasing company is meant to protect the vendor to prevent a customer from damaging its assets, such clause does not prevent a lease from happening. As a result, we can still say there is a lease agreement in the above contract.
You’d have to consider all the facts in the arrangement according to those listed conditions before determining whether a lease exists or not. There is no one-cap-fits-all-answer to any scenario.
The contract contains a lease, even though the clause of not transporting explosives is there, I would think that there should be some exceptions to things or events that will be harmful to both life and property. This video is really educative and simplified please do more on other standards
Thanks for your comment Henrietta! Yes you are spot on. I shared the analysis on Quora 👉🏾ifrsiseasy.quora.com/Identifying-a-lease-under-IFRS-16-Can-you-solve-this-1?ch=10&oid=361573111&share=c988f958&srid=33i0u&target_type=answer
Nice content Emeritus👍. The scenario would have qualified as a lease if not for the clause by the freight operator on the transportation of explosives.
Thank you for your comments Tommy Keys! Yes it's true that the clause creates a question of whether Mary truly has a lease or not. However, IFRS 16 allows for some exceptions to the rule. This exception is referred to as protective rights. When a contract clause created by the leasing company is meant to protect the vendor to prevent a customer from damaging its assets, such clause does not prevent a lease from happening. As a result, we can still say there is a lease agreement in the above contract.
What if you give car to an Uber driver or a car rental company that gives you a specific amount of returns weekly? Is it a lease?
You’d have to consider all the facts in the arrangement according to those listed conditions before determining whether a lease exists or not. There is no one-cap-fits-all-answer to any scenario.