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1) Why does NZ IFRS 16 allow exemptions, from capitalising lease assets and lease liabilities, to...

1) Why does NZ IFRS 16 allow exemptions, from capitalising lease assets and lease liabilities, to a lessee.

Explanation required.Thanks!

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Answer #1

Exemptions is allowed from capitalising lease assets and lease liabilities to the leasee in the following two cases:

1) If the asset is of low nominal value

This exemption is given to the leasee to so that the cost related to lease can be reduced and complexity arises from the implementation of the new standard can also be handled.

2)If the lease term is less than 12 month or 1 year

This exemptions is given to the leasee to control or limit the cost of the implementation of the new leases standard and that too without impairing the quality of the information provided in the financial statement

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