International Accounting Standard 17
IAS 17 (" Leases ", in the English original: " Leases ") regulates the accounting treatment of leases within the International Financial Reporting Standards . The standard was published in 1982 and was applicable for the first time to fiscal years beginning after January 1, 1984. For fiscal years from January 1, 2019, it will be replaced by the new, essentially identical, IFRS 16 .
Goal setting
The International Accounting Standards Board (IASB) defines the objective of the standard as requiring lessors and lessees to use appropriate accounting methods and disclosure requirements in connection with accounting for leases (paragraph 1).
scope of application
In accordance with IAS 17.2, IAS 17 is generally to be applied to the accounting of all leases. In deviation from the principle, the standard is not to be applied to leases that involve natural resources (IFRS 6) or certain license agreements.
In principle, IAS 17 also applies to leases for investment property (IAS 40 Investment Property ) and to leases for biological assets (IAS 41 Biological Assets ). However, these assets are valued in accordance with IAS 40 or IAS 41. The background here is that both standards provide for accounting for subsequent valuation using the full fair value method, which is generally favored by the IASB.
The concept of the lease
A lease is defined in IAS 17.4 as an arrangement in which the lessor grants the lessee the right to use an asset for an agreed period in return for a payment or a series of payments.
Classification of Leases
IAS 17 differentiates between finance leases and operating leases . For the classification of a lease according to IAS 17, it is not primarily the legal structure of the contractual relationship that is important, but the economic content (principle of the economic approach - substance over form ).
In order to understand the classification rules, the efforts of the IASB to narrow down the scope for accounting policy measures, which represent a particular problem with regard to leasing accounting , are essential . In order to improve the balance sheet, lessees usually endeavor to outsource leasing objects and debts from the balance sheet (off-balance sheet status). This can lead to information that is relevant for users of the balance sheet not being shown in the annual financial statements. Since this contradicts the principles of IFRS, the IASB endeavors to prevent economically unjustified off-balance sheet designs through corresponding accounting regulations.
In order to achieve a balance sheet representation of leases that corresponds to the actual circumstances, the IASB pursues a risk-and-reward approach in leasing accounting . H. The distribution of the associated opportunities and risks is decisive for classification as a finance lease or operating lease.
Finance leasing
With finance leasing as defined by the standard, essentially all risks and opportunities associated with ownership of the leased object are transferred to the lessee. Ultimately, ownership may or may not be transferred. (IAS 17.4) The finance lease in the sense of IAS 17 does not correspond to a rental agreement, but can be interpreted as purchase financing.
Operating leasing
An operating lease is defined as any lease that is not a finance lease. The most important difference to finance leasing is that the main opportunities and risks associated with the use of the asset remain with the lessor.
Accounting for leases
Finance leasing
Accounting at the lessor
If there is a finance lease, lessors have to capitalize a receivable in their balance sheet in the amount of the net investment in the lease. The lessor treats the outstanding lease payments as a capital repayment and financial income.
During the term of the contract, the finance income generated by the lessor must be distributed on a planned and reasonable basis in accordance with the principle of accrual of income. The procedure is to ensure that the recognition of financial income reflects constant periodic interest on the lessor's net investment in the lease.
Accounting by the lessee
At the beginning of the lease term, the lessee must recognize the lease as assets and liabilities in the same amount in the balance sheet. Offsetting is not possible. The debts are made up of the future payment obligations of the lessee resulting from the lease. The asset or liability is valued either at the fair value of the leased item or at the present value of the minimum lease payments, if this is lower.
As part of the subsequent assessment, the minimum lease payments are to be broken down into the financing costs and the repayment portion of the remaining debt. The financing costs are distributed over the term of the lease in such a way that a constant interest rate arises on the remaining debt over the periods. Contingent rent payments are recognized as an expense in the period in which they are incurred. Furthermore, the usual principles with regard to scheduled (e.g. according to IAS 16) and unscheduled depreciation (IAS 36) must be observed in the subsequent measurement.
Operating leasing
Accounting at the lessor
Since the lessor is the legal and economic owner of the leasing objects in operating leases, the lessor has to capitalize the leasing objects in his balance sheet. The initial valuation is carried out at acquisition or production cost.
After the initial recognition, the leased objects capitalized in the balance sheet are to be depreciated according to the usual principles and, if necessary, unscheduled. The leasing income is to be recorded in the income statement on a straight-line basis over the term of the contract, unless a different distribution corresponds more to the development of benefits over time. The actual amount and temporal distribution of the income play a fundamental role in the recording of income. not matter.
Accounting by the lessee
Since the lessee is in the position of a mere tenant in operating leasing, the presentation of the leasing relationship in its annual financial statements is limited to recording the leasing rates in the income statement. The leasing installments are to be recognized as an expense on a straight-line basis over the term of the lease, unless another systematic basis corresponds more closely to the course of the benefits for the lessee over time.
literature
- A. Coenenberg: Annual accounts and analysis of the annual accounts. 21st edition. Stuttgart 2009.
- KF Göller: Purchase, rental and leasing according to International Financial Reporting Standards. In: Christoph J. Börner, Oliver Everling, Robert Soethe (eds.): Buying, renting and leasing in the rating: reliably assessing the financing of long-lived assets. Wiesbaden 2007, pp. 119–152.
- T. Kümpel, M. Becker: Leasing according to IFRS. Assessment, accounting and reporting requirements. Munich 2006.