Analysis of Lease Accounting Treatment Under ASC 842 and IFRS 16: A Case Study of Auto Inc. and Trans-Atlantic Inc. Contracts

This memorandum examines the application of ASC 842 and IFRS 16 lease accounting standards to contracts between Auto Inc. and Trans-Atlantic Inc. for the transportation of sedan and luxury cars. The analysis focuses on identifying whether these contracts contain leases by assessing the presence of identifiable assets and the right to control their use. The study concludes that the sedan car contract meets the criteria for a lease under both standards, with MV Manhattan as the identifiable asset and Auto Inc. having control over its use. Conversely, the luxury car contract does not qualify as a lease due to the absence of an identifiable asset and lack of control by Auto Inc. The memorandum also highlights key similarities and differences between ASC 842 and IFRS 16 in lease identification and classification, offering valuable insights for practitioners navigating these accounting frameworks.