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Ministry of Justice of Ukraine

January 20, 2011

No. 91/18829

Approved by the Order of the Ministry of Finance of Ukraine of December 24, 2010 No. 1629

National provision (standard) of financial accounting in public sector 126th "Lease"

(as amended on 13-06-2017)

I. General provisions

1. This National provision (standard) determines the methodological principles of forming in financial accounting of information on rent transactions and its disclosure in the financial reporting of lessees and lessors.

2. Regulations of this National provision (standard) are applied by subjects of financial accounting in public sector (further - subjects of public sector).

3. This National provision (standard) does not extend to assessment of assets which is determined in other national provisions (standards) of financial accounting in public sector, in particular objects of the investment real estate, biological assets, and also lease agreements connected with investigation and use of natural and similar non-reproducible resources (except for leases of the parcels of land), use author's and the rights, adjacent to it.

4. Terms which are used in national provisions (standards) of financial accounting in public sector have such value:

the guaranteed salvage value:

for the lessee - that part of salvage value which is guaranteed to payment by the lessee or the related party;

for the lessor - that part of salvage value which is guaranteed to payment by the lessee or the independent third party capable on the financial condition to answer on guarantee;

minimum lease payments - the payments which are subject to payment by the lessee during lease term (less the cost of services and taxes, which are subject to payment to the lessor, and the unforeseen rent) increased:

for the lessee - on the amount of its guaranteed salvage value;

for the lessor - on the amount of its guaranteed salvage value.

In case of opportunity and intention of the lessee to acquire object of lease at the price, is lower than its fair value for date of acquisition, minimum lease payments consist of the minimum rent for all lease term and the amounts which should be paid according to the contract for acquisition of object of lease;

not negative lease - the lease agreement for which the lessee on lease term commencement pays such amount of the rent which gives the chance to the lessor to be sure of continuation of lease term or which can be terminated only:

on permission of the lessor;

if there was certain unforeseen event;

in case of the conclusion the lessee of the new lease of the same asset or instead of it another asset similar to destination with the same lessor;

payments by the lessee of the additional amount which testifies to the acceptability of continuation of lease term;

non-quaranteed salvage value - part of salvage value of object of lease which the lessor is not provided or guaranteed only by the related party;

the unforeseen rent - part of the rent which is not fixed by the specific amount and is calculated using indicators of others, than lease term (sales amount, use level, the inflation index and the prices, market rates of percent and so forth);

lease - the agreement under which the lessee acquires right to use non-current asset for a fee during the term approved with the lessor;

operating lease - lease another, than financial;

rental rate of percent - percent rate at which the present cost of the amount of minimum lease payments and non-quaranteed salvage value equals fair value of object of finance lease on lease term commencement;

lease term commencement - date which comes earlier: signature date of the lease agreement or acceptance date parties of obligations of rather basic provisions of the lease;

percent rate on possible loans of the lessee - percent rate which the lessee would shall pay for similar lease, or (if this indicator cannot be determined) rate of percent on loans for acquisition of similar asset (for the same term and with similar guarantee) in lease term commencement;

lease term - the period of action of not negative lease agreement, and also the period of continuation of this agreement caused in lease term commencement;

the sublease - the agreement on transfer by the lessee of the object leased by it to lease to the third party which cannot exceed the duration of the agreement of lease;

present cost - the discounted amount of future payments (less the amount of the expected compensation) which, as expected, will be necessary for repayment of the obligation;

finance lease - lease which provides transfer to the lessee of all risks and benefits connected with right to use and ownerships of asset. Lease is considered financial in the presence of at least one of the stated below signs:

the lessee acquires the property right to leased asset after the termination of lease term;

the lessee has opportunity and intention to acquire object of lease at the price, is lower than its fair value for date of acquisition;

the lease term constitutes the most part of useful life (operation) of object of lease;

the present cost of minimum lease payments from lease term commencement equals or exceeds fair value of object of lease;

the leased asset has special nature which gives the chance only to the lessee to use it without expenses on its upgrade, modification, additional equipment;

the lessee can extend lease of asset for a fee, is much lower than the market rent;

lease can be stopped by the lessee who compensates to the lessor of its loss from the lease termination;

income or losses from changes of fair value of object of lease for the end of lease term belong to the lessee.

II. Accounting of finance lease at the lessee

1. The assets received in finance lease by the subject of public sector are displayed (lessee) which by the legislation is granted the appropriate right in financial accounting as assets and liabilities at fair value of leased property at the beginning of lease or if they are lower than fair value, at the present cost of the amount of minimum lease payments.

2. The difference between the amount of minimum lease payments and project cost of finance lease on which it was displayed in financial accounting of the lessee at the beginning of the term of finance lease is expenses of financial activities of the lessee and is displayed in financial accounting and the reporting only in the amount which belongs to the accounting period and is distributed on pro rata basis.

3. If in the agreement on finance lease the rental rate of percent is not specified, then the lessee applies percent rate on possible loans of the lessee to determination of present cost of the amount of minimum lease payments and expense allocation of financial activities.

4. Expenses of the lessee on improvement of object of finance lease (upgrade, modifications, completion, additional equipment, reconstruction and so forth) leading to increase in future economic benefits which originally were expected from its use are displayed as capital investments which join in the project cost of finance lease.

5. Losses from reduction of usefulness of objects of finance lease are recognized the lessee according to the procedure, provided by other national provisions (standards) of financial accounting in public sector.

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