ifrs-leases

name

ifrs-leases

description

Lease accounting under IFRS 16 (full IFRS) and Section 20 (IFRS for SMEs). Lessee single on-balance-sheet model under IFRS 16; lessee operating-vs-finance classification under Section 20. Short-term and low-value exemptions. Lessor classification. Sale-and-leaseback. Use when leases or rental arrangements are in scope. Tier-3 scope — full lessee build deferred until a client materially requires it; Section 20 short-term operating-lease handling and IFRS 16 exemption-test reference are built first.

Leases (IFRS 16 / Section 20)

Tier-3 scope

This skill is Tier-3 in the build queue. Most Chwezi SME clients have short-term leases (rent, equipment hire) where the IFRS 16 short-term and low-value exemptions or the Section 20 operating-lease model apply. The full IFRS 16 lessee model (right-of-use asset and lease liability with discount-rate computation, reassessment, modification) is built when a real client carries material non-cancellable, non-short-term, non-low-value leases under full IFRS.

Required first reads

• doctrine/accounting-finance-doctrine.md
• doctrine/references/ifrs-for-smes-default.md (Section 20)
• doctrine/references/full-ifrs-overlay.md (IFRS 16)

Section 20 (IFRS for SMEs)

Lessee classifies leases as finance leases or operating leases at inception. Finance lease: substantially all the risks and rewards of ownership transfer. Operating lease: otherwise. Recognition:

• Operating lease (lessee): rental expense on a straight-line basis over the lease term (unless another systematic basis is more representative).
• Finance lease (lessee): asset and lease liability at the lower of fair value and PV of minimum lease payments; subsequent depreciation of the asset and interest on the liability using the effective-interest method.

Lessor: mirror classification; operating-lease income on a straight-line basis or finance-lease receivable with effective-interest.

IFRS 16 lessee model

Single on-balance-sheet model for all leases:

• Right-of-use (ROU) asset and lease liability recognised at lease commencement.
• ROU = lease liability + prepayments + initial direct costs + dismantling provision − incentives.
• Lease liability = PV of unpaid lease payments at incremental borrowing rate (or implicit rate if determinable).
• Subsequent: depreciate ROU; unwind interest on liability.

Exemptions:

• Short-term leases (≤ 12 months, no purchase option): may elect straight-line expense.
• Low-value underlying asset (≤ ~USD 5,000 equivalent when new): may elect straight-line expense.

Initial build (Tier-3 minimum)

• Lease register: lessor, asset, commencement, end, payments schedule, renewal options, purchase options, dismantling obligation.
• Section 20: classification logic; straight-line expense generator.
• IFRS 16: exemption-test calculator; for non-exempt, manual workings until full ROU engine is built.
• Disclosure note generator for both frameworks.

CoA implications (when full IFRS 16 is implemented)

Code	Name
1850 Right-of-Use Asset	Non-current, by class.
1859 Accumulated Depreciation — ROU	Non-current contra.
2710 Lease Liability — Current	Current portion.
2720 Lease Liability — Non-current	Non-current portion.
6510 Depreciation of ROU	P&L.
8110 Interest on Lease Liabilities	P&L.

Forbidden patterns

• Lessee operating-lease classification under full IFRS without explicit short-term / low-value exemption documentation (blocker).
• Mixing exemption election year-on-year without disclosure (major).
• Section 20 finance-lease accounting on a lease where risk-and-reward transfer is not substantially all (blocker).

Files

• SKILL.md.
• references/exemption-test.md (to be built when needed).
• references/full-ifrs-16-lessee-model.md (to be built when needed).

Last reviewed: 2026-05-12. Next review due: 2026-11-12.

Prerequisites

• Load doctrine/accounting-finance-doctrine.md before applying this skill.
• Load governance/finance-accounting-quality-gate.md when the output is a release, client artefact, SRS, SDS, proposal, business plan, or implementation plan.
• Use doctrine/source-register/ for final statutory, tax, payroll, FX, EFRIS, eTIMS, or authority-template values.

Inputs

Artifact	Produced by	Required?	Validation
Finance context map	finance-module-audit	Required	Entity, framework, jurisdiction, modules, users, and deployment context are named.
Doctrine baseline	Doctrine owner	Required	Doctrine version and reporting framework are stated.
Source-register snapshot	tax-statutory-source-register-and-country-packs	Required for final statutory output	Entries are verified-current or reviewer-approved verified-with-caveat.
Ledger/posting context	ledger-posting-engine-core	Required when postings are affected	Posting boundary, CoA mappings, control accounts, dimensions, and period state are known.

Outputs

Artifact	Consumed by	Acceptance evidence
Skill-specific decision record	Implementer, reviewer, quality gate	Scope, assumptions, chosen treatment, rejected alternatives, and caveats are recorded.
Implementation or workflow contract	Software, SRS, SDS, proposal, or business-plan engine	Contract names inputs, outputs, controls, evidence, and failure conditions.
Acceptance evidence	Finance quality gate	Tests, fixtures, examples, source links, reviewer sign-off, or evidence-pack references are present.
Plain-language explanation	Client, owner, manager, operator	Business meaning is stated before technical accounting treatment where client-facing.

Decision Rules

• Prefer IFRS for SMEs for typical SME entities unless full IFRS, local law, donor requirements, or client policy requires otherwise.
• Treat every money-touching workflow as ledger, control, reconciliation, evidence, and reporting scope.
• Do not finalize statutory values without source-register support and reviewer status.
• Use business-language output for operators and accountant-language output for ledger, reporting, and audit users.
• Escalate uncertain framework, tax, or statutory interpretations to the required reviewer role instead of presenting them as final.

Acceptance Evidence

• Inputs and outputs above are present or explicitly marked not applicable.
• Relevant quality-gate blockers have been checked and no blocker remains unresolved.
• Examples or fixtures cover at least one happy path and one failure or caveat path for this skill's domain.
• Reviewer role, review date, and open caveats are recorded for release-grade artefacts.

Anti-Patterns

• Treating draft planning assumptions as final statutory or accounting facts.
• Hiding tax, payroll, FX, or authority-template caveats in prose instead of source-register state.
• Producing technically correct accounting output without a plain-language layer for non-accountant users.
• Closing a remediation or implementation item without observable evidence.

Required References

• doctrine/accounting-finance-doctrine.md.
• governance/finance-accounting-quality-gate.md.
• docs/reference-manifest.md for declared reference states.
• Domain-specific references listed earlier in this skill.

Examples

• Include at least one normal workflow example for this skill's domain.
• Include at least one exception, rejection, reversal, stale-source, or reviewer-caveat example where the domain can fail.

Review Metadata

Last reviewed: 2026-05-15. Next review due: 2026-11-15.