IAS 17 Leases

International Accounting Standard 17

Issued: in 1982; re-issued in 1997 and 2003, followed by amendments
Effective date: 1 January 2005
Superseded by IFRS 16 Leases effective 1 January 2019
What it does:
- It defines lease-related terms , such as lease, finance lease, operating lease, minimum lease payments, interest rate implicit in the lease, guaranteed and unguaranteed residual value, etc.;
- It classifies the lease as finance or operating and specifies 5 situations when the lease is normally classified as finance:
  1. Transfer of ownership of the asset;
  2. Option to purchase the asset at a price lower than the fair value;
  3. The lease term is for the major part of the economic life of the asset;
  4. At the inception, the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset;
  5. The lease assets are of a specialized nature
  IAS 17 names also further 3 indicators that lead to the lease being classified as a finance lease.
- It outlines the rules for presenting the leases in the financial statements of both lessees and lessors;
- It prescribes the rules for presenting the sale and leaseback transactions and provides illustrative examples in its implementation guidance.

Summary of IAS 17 Leases
IFRS 16 vs. IAS 17: How the Lease Accounting Changed – you can find the summary of the main changes and simple illustrative example here
Troubles with IFRS 16 Leases – this article outlines the main implementation challenges when adopting IFRS 16
How to Calculate the Interest Rate Implicit in the Lease

See more questions in IFRS 16 resources.

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