Lease receivable

BC35 When the lessor makes the underlying asset available for use by the lessee, the lessor has fulfilled its obligation to transfer the right to use that asset to the lessee - the lessee controls the right of use. Accordingly, the lessor has an unconditional right to receive lease payments (the lease receivable). The lessor controls that right - for example, it can decide to sell or securitise that right. The right arises from past events (not only the commitment to the lease contract but also the underlying asset being made available for use by the lessee) and is expected to result in future economic benefits (typically cash from the lessee) flowing to the lessor.

BC36 Consequently, the IASB concluded that the lessor’s lease receivable meets the definition of an asset in the Conceptual Framework. The IASB is of the view that the changes proposed to the definition of an asset in the Conceptual Framework Exposure Draft would not affect this conclusion.

Rights retained in the underlying asset

BC37 Although the lessor transfers the right to use the underlying asset to the lessee at the commencement date, the lessor has the right to the underlying asset at the end of the lease term (and retains some rights to the underlying asset during the lease term; for example, the lessor retains title to the asset). Consequently, the lessor retains some of the potential economic benefits embedded in the underlying asset.