The methods are some of the problems of a lease transaction that require you to make an analysis and provide justification based on MFRS 16 Lease.

Ovi Supply Chain Solution has entered into a lease contract to rent a new trailer for 4 years. The lease contract clearly states the model, specifications and registration number of the trailer. The contract also states that the lessor is entitled to exchange another trailer of equivalent economic value on the date the exchange is made in the event of severe damage. The lessor does not have any economic benefit from these exchange terms because they bear the cost of repairs. It is a common term as a damaged trailer takes a long time to repair but the probability of severe damage to a new trailer is very low. There are no specific restrictions regarding the manner and time of use of the trailer. However, Ovi Supply Chain chose to classify the lease as an operating lease on the grounds that the terms of the trailer exchange did not establish an identifiable asset criterion to be recorded at the inception of the lease.