In short
A lessee can elect, by class of asset, not to recognize a right-of-use asset and lease liability for short-term leases: those with a term of 12 months or less and no purchase option the lessee is reasonably certain to exercise.
Key takeaways
- Lease payments are expensed on a straight-line basis over the term.
- Renewal options the lessee is reasonably certain to exercise count toward the term.
- If the term later extends beyond 12 months, the lease is no longer short-term.
Where it's tested
FAR: Leases — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A lessee may elect NOT to recognize a right-of-use asset and lease liability when: