You are here

A roadmap for leases

Wednesday, August 10, 2016 - 05:50

NOT sure if you have an asset that contains a lease? ISCA's leases roadmap will help you find your way.

Roadblock 1: Is there an identified asset? If NO, the journey ends. If YES, proceed to Roadblock 1A.

Roadblock 1A: Does the supplier have sub-stantive asset substitution rights? If YES, the journey ends. If NO, proceed to Roadblock 2.

Roadblock 2: Does the customer have the right to control the use of the identified asset? If YES, the contract contains a lease.

Roadblock 2A: Does the customer have the right to obtain "substantially all" of the economic benefits from the use of the identified asset? If NO, the journey ends. If YES, proceed to Roadblock 2B.

Roadblock 2B: Does the customer have the right to direct the use of the identified asset? If NO, the journey ends. If YES, the contract contains a lease.

Roadblock 2B (i): Does the customer have the right to direct how and for what purpose the asset is used throughout the period of use? If YES, the contract contains a lease. If NO, consider Roadblock 2B(ii)

Roadblock 2B (ii): Are the relevant decisions about how and for what purpose the asset is used predetermined? If YES, (i) does the customer have the right to operate the identified asset throughout the period of use without the supplier having the right to change those operating instructions, or (ii) did the customer design the asset in a way that predetermines how and for what purpose the asset will be used throughout the period of use? If YES to either (i) or (ii), the customer can still direct the use of the asset and hence, the contract contains a lease.