Perhaps the goal is to find two service recipients to buy all the power, so that neither has the primary economic benefits of ease. ASC 842 took the example of a solar installation and characterized it as a lease agreement, but it was not entirely clear whether this conclusion was that the taker was involved in the design of the facility (see below) or because he was the sole consumer. Variable rental payments based on the customer`s use of assets (for example. B variable payments on a sales basis) do not prevent a customer from reaping all the economic benefits of using the asset. Although the customer transmits some of the benefits to the supplier through variable payments, the customer remains the entity that receives the economic benefits of using the asset (in this case, the cash flow generated by sales). IFRS 16 expressly excludes on this point the possibility for companies to include variable lease payments in order to avoid the agreement being classified as a leasing and, therefore, leasing accountant. Under IFRS 16, a lease agreement is defined as “a contract or part of a contract that gives the right to use an asset (the underlying asset) for a fixed period for compensation.” Under the two rules of the IRC service contract, physical control and economic benefits are all factors that are used to assess compliance with the rules applicable to service contracts. ASC 842 has not defined what a lease is, as it has specified what is and what is not a lease. ASC 842 defined an agreement as a lease agreement when the contract transfers, for a specified period of time, the right to control the use of an identified asset (property, investment or equipment). From an economic point of view, if the recipient had that right, the service provider would likely need a fixed payment component within the payment structure. Otherwise, the service provider would probably not be able to enter into such a transaction, as it would have no guarantee of performance unless the service provider had another source to which it could sell the electricity.
To structure a transaction as a service contract and not as a lease, the basic business model would normally have to change. Whether both parties would accept this change depends not only on the rate that would be calculated for the agreement, but also on the level of service the recipient would expect from the supplier. The economic benefits must be taken into account with respect to the productive resources and benefits of these resources during the period of the agreement, as well as with respect to the relationship between the source of the benefit and the recipient. For example, the economic benefit of using a truck to ship goods rests with the contracting party providing these services and not with the party that makes the truck available only to the shipper. The distinction is very important because some contracts currently considered leases are now recognized as service contracts under IFRS 16 and vice versa. Contracts considered leases are activated on the balance sheet, with the amortization of ROU assets being recorded separately and the lease debt being recorded separately. This requires companies to audit all their contracts for goods and equipment to determine if they contain a leasing element in accordance with the new accounting rules. For many companies, the process of identifying leases is one of the most demanding aspects of the new leasing consultancy. While companies do not consider service contracts to be leases, these contracts may be based on the use of certain assets and, therefore, include a lease.
