Leases (IFRS 16 / Section 20)

Tier-3 scope

This skill is Tier-3 in the build queue. Most Chwezi SME clients have short-term leases (rent, equipment hire) where the IFRS 16 short-term and low-value exemptions or the Section 20 operating-lease model apply. The full IFRS 16 lessee model (right-of-use asset and lease liability with discount-rate computation, reassessment, modification) is built when a real client carries material non-cancellable, non-short-term, non-low-value leases under full IFRS.

Required first reads

• doctrine/accounting-finance-doctrine.md
• doctrine/references/ifrs-for-smes-default.md (Section 20)
• doctrine/references/full-ifrs-overlay.md (IFRS 16)

Section 20 (IFRS for SMEs)

Lessee classifies leases as finance leases or operating leases at inception. Finance lease: substantially all the risks and rewards of ownership transfer. Operating lease: otherwise. Recognition:

• Operating lease (lessee): rental expense on a straight-line basis over the lease term (unless another systematic basis is more representative).
• Finance lease (lessee): asset and lease liability at the lower of fair value and PV of minimum lease payments; subsequent depreciation of the asset and interest on the liability using the effective-interest method.