Right to control the use of the identified asset

A contract conveys the right to control the use of an identified asset for a period of time if, throughout the period of use, the customer has 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.

Right to obtain substantially all of the economic benefits from use of the identified asset

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When is an asset identified?

Even if an asset is specified, a customer does not have the right to use an identified asset if, at inception of the contract, a supplier has the substantive right to substitute the asset throughout the period of use (i.e., the total period of time that an asset is used to fulfil a contract with a customer, including the sum of any non-consecutive periods of time).… Continue reading

Does the contract contain a lease 4

Does the customer have the right to operate the asset throughout the period of use, without the supplier having the right to change those operating instructions?

Consideration: The customer has the right to operate the asset (or to direct others to operate the asset in a manner that it determines) throughout the period of use, without the supplier having the right to change those operating instructions.

Yes   /   No

This is part of the  walk through decision model that
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Does the contract contain a lease 2

Does the customer have the right to obtain substantially all of the economic
benefits from use of the asset throughout the period of use?

Consider the explanations in the right to obtain economic benefits from use, before answering the question yes or no. You will be going to the next question or come to a conclusion.

Yes   /   No

This is part of the  walk through decision model that may assit in determining if a contract contains
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Identified asset

Even if an asset is specified, a customer does not have the right to use an identified asset if the supplier has the substantive right to substitute the asset throughout the period of use. A supplier’s right to substitute an asset is substantive only if both of the following conditions exist:

  1. the supplier has the practical ability to substitute alternative assets throughout the period of use (for example, the customer cannot prevent the supplier from substituting the asset and alternative
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IFRS 16 into the details – 1

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:

  1. the right to obtain substantially all of the economic benefits from the use of the identified asset, and
  2. the right
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