AASB 16 Leases 75-80: Recognise finance income so the lessor's net investment earns a constant periodic return, apply AASB 9 derecognition and impairment, review unguaranteed residuals, and account for finance lease modifications as a separate lease, a new operating lease or under AASB 9

What does 75-80 require?

Finance income is recognised over the term on a pattern that yields a constant periodic return on the lessor's net investment, with payments applied against the gross investment to reduce principal and unearned income. The net investment is subject to the AASB 9 derecognition and impairment rules; estimated unguaranteed residual values are reviewed regularly and any reduction revises the income allocation with the accrued shortfall recognised at once. An asset under a finance lease classified as held for sale follows AASB 5. A modification that adds a right of use at a commensurate price is a separate lease; any other modification is treated as a fresh lease from its effective date with the underlying asset measured at the net investment just before the modification where the lease would have been an operating lease on the modified terms at inception, and otherwise under AASB 9.