Gautam Gupta
Quick Summary
There are certain places with restrictions to lease the premises, only the owner of the premise can use the premise to run the business. In such a case, the lease agreement is framed in such a way where agreement states that the owner of the premises is running the business on the premises but such
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FAQ :
Handing over business operations can equate to a lease if the contract conveys the right to control the use of an identified asset (the premises) for a period in exchange for consideration, and the party receiving the premises has the right to obtain substantially all economic benefits and direct its use.
A principal is primarily responsible for fulfilling performance obligations and bears the risks and rewards of operations, while an agent acts on behalf of another party.
The 'Florence' restaurant example illustrates a situation where ABC Limited operates a restaurant on XYZ Ltd's premises, helping to analyse whether ABC is a principal or agent and if the agreement constitutes a lease.
An asset is identified if it's explicitly specified in the contract or implicitly specified when the supplier makes it available to the customer, provided the supplier doesn't have substantive substitution rights.
If the agreement is deemed a lease, the revenue share or minimum guaranteed payment to the premises owner (XYZ Ltd in the example) is treated as lease expenses for the use of the premises.
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