AASB 16 Leases 67-74: For a finance lease recognise a receivable at the net investment in the lease, measured at the implicit rate with initial direct costs included, and for manufacturer or dealer lessors recognise revenue, cost of sale and selling profit at commencement with market-rate interest

What does 67-74 require?

At commencement a lessor derecognises the underlying asset and presents a receivable equal to its net investment in the lease, measured using the implicit rate (an intermediate lessor may use the head lease rate adjusted for sublease direct costs when the sublease rate is not readily determinable). Initial direct costs other than those of a manufacturer or dealer lessor are built into the net investment by the definition of the implicit rate. The payments included mirror the lessee's list: fixed and in-substance fixed payments less incentives payable, index or rate linked variable payments at commencement values, residual value guarantees from the lessee, a related party or a financially capable third party, a reasonably certain purchase option price and termination penalties where the term reflects termination. A manufacturer or dealer lessor recognises revenue at the lower of the asset's fair value and the lease payments discounted at a market rate, cost of sale as the asset's cost or carrying amount less the discounted unguaranteed residual, and selling profit on its outright sales policy, restricting profit to a market-rate result where artificially low rates are quoted, and expensing its costs of obtaining the lease at commencement.