| 20.1 | This section applies to leases, except for: [AMD 444] |
| (a) | leases to explore for or use minerals, oil, natural gas and similar non-regenerative resources; [AMD 445] |
| (b) | licensing agreements for such items as motion picture films, video recordings, plays, manuscripts, patents and copyrights (see Section 18 Intangible Assets other than Goodwill); |
| (c) | measurement of property held by lessees that is accounted for as investment property and measurement of investment property provided by lessors under operating leases (see Section 16 Investment Property); |
| (d) | measurement of biological assets held by lessees under finance leases and biological assets provided by lessors under operating leases (see Section 34); and |
| (e) | leases that could lead to a loss to the lessor or the lessee as a result of non-typical contractual terms (see paragraph 12.3(f)). |
| (f) | [deleted] |
| 20.2 | This section applies to agreements that transfer the right to use assets even though substantial services by the lessor may be called for in connection with the operation or maintenance of such assets. This section does not apply to agreements that are contracts for services that do not transfer the right to use assets from one contracting party to the other. |
| 20.3 | Some arrangements do not take the legal form of a lease but convey rights to use assets in return for payments. Examples of arrangements in which one entity (the supplier) may convey a right to use an asset to another entity (the purchaser), often together with related services, may include outsourcing arrangements, telecommunication contracts that provide rights to capacity and take-or-pay contracts. |
| 20.3A | Determining whether an arrangement is, or contains, a lease shall be based on the substance of the arrangement and requires an assessment of whether: |
| (a) | fulfilment of the arrangement is dependent on the use of a specific asset or assets. Although a specific asset may be explicitly identified in an arrangement, it is not the subject of a lease if fulfilment of the arrangement is not dependent on the use of the specified asset. An asset is implicitly specified if, for example, the supplier owns or leases only one asset with which to fulfil the obligation and it is not economically feasible or practicable for the supplier to perform its obligation through the use of alternative assets; and |
| (b) | the arrangement conveys a right to use the asset. This will be the case where the arrangement conveys to the purchaser the right to control the use of the underlying asset. |
| AMD 444 Amendment Paragraph 20.1 amended by Amendments to FRS 102: The Financial Reporting Standard applicable in the UK and Republic of Ireland – Triennial review 2017 – Incremental improvements and clarifications (issued December 2017) Effective date 01/01/2019 Previous text 20.1 This section covers accounting for all leases other than: |
| AMD 445 Amendment Paragraph 20.1(a) amended by Amendments to FRS 102: The Financial Reporting Standard applicable in the UK and Republic of Ireland – Triennial review 2017 – Incremental improvements and clarifications (issued December 2017) Effective date 01/01/2019 Previous text (a) leases to explore for or use minerals, oil, natural gas and similar non-regenerative resources (see Section 34 Specialised Activities); |
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