Currently my organisation is treating leases under IAS 17 (due to move to IFRS 16 in the near future) and I have an issue with a treatement of a leased invoice for a car. The FV (list price) of the car at inception was £29k.
The inv (£29k) is split between lease rental (total rental cost £19k over the 5 years) and service rental (total rental cost £10k over the 5 years), the lease being capatlised and the service being expensed.
Looking at the IAS 17 rules to capitalise, ownership transferred at the end of the lease; option to purchase at the end; lease for majority of economic life of asset and PV of min. lease payments amounts to substantially all of the FV of the asset (plus other rules not applicable to this situation), none of these are apply to this vehicle and specifically the PV of lease payments compared to FV of asset. When looking at the last point as they only wanted to capitalise the leased part then the total leased payments is only 65% of the FV of the vehicle at inception.
Am I correct in thinking the whole of the invoice should be expensed?