Recognition of a lease
To start for the first time a reporting entity has to review all contracts to see whether a specific contract is a lease only or contains a lease component.
Looking at the definition of a lease the reporting entity has to assess whether, throughout the period of use, the lessee has met the following two rights:
- the right to obtain substantially all of the economic benefits from the use of the identified asset, and
- the right to direct the use of the identified asset.