STRATEGY POLICY INVENTORY DATA
SYSTEM PROCESS
CONTROL SUSTAIN
9
tangoanalytics.com
How do you define a lease
under the new standard?
First, let's agree on how a lease is defined under the new standard: "A lease is
an arrangement that conveys the right to control the use of an identified asset
for a period of time in exchange for consideration." This definition has two key
points: control and identified asset.
What is involved in control?
1.
2.
What is meant by an identified asset?
It's something that could be either implicitly or explicitly identified in a contract
and can be a physically distinct portion of a larger asset. If the supplier has
a substantive substitution right, the contract isn't a lease. A supplier has the
substantive right to substitute an asset if it both:
•
•
The new standards apply to property, plant and equipment leases, but do not
apply to leases of intangible assets (i.e. goodwill, patents, trademarks and
copyrights), leases to explore for or use nonregenerative resources, leases of
biological assets, leases of inventory or leases of assets under construction.
The right to obtain substantially all the economic benefits
from use of the identified asset.
The right to control the use of the identified asset – to direct
its use over the term of the lease.
Has the practical ability to substitute the identified asset
Can benefit from exercising that right of substitution
ROAD TO LEASE COMPLIANCE
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