IFRS 16 recognition exceptions apply to short-term leases and leases of low-value assets. How are lease payments for these treated in the lessee's accounts?

• A. Capitalize as ROU asset
• B. Recognise as an expense in SPL
• C. Recognise as a reduction of equity
• D. Recognise as a tax deduction

Answer: (B)

The main point is that IFRS 16 provides exemptions for short-term leases and leases of low-value assets, so the lessee does not recognize a right-of-use asset or a lease liability for these items. Instead, the lease payments are recognized as an expense in the profit or loss as and when the payments are due, typically on a straight-line basis over the lease term. This is an operating expense and goes through the SPL (profit or loss), not through equity or as a tax deduction in the accounting records. The exemption simplifies accounting for small, short-duration leases, so there’s no capitalization of a lease asset in these cases.