Motor vehicles in director's name used in company

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mehranmichail
Posts: 39
Joined: 14 Apr 2019, 04:54

Motor vehicles in director's name used in company

Post by mehranmichail »

Hi, request for guidance in the following case
A taxi business incorporated as limited company. Sole director /shareholder has 5 vehicles leased in his own name. These vehicles are used by company. Income is coming into company's bank account , running expenses are incurred by the company and paid through its bank. The company is not showing these vehicles as assets controlled by company on the pretext that these vehicles /lease is in director /shareholder individual name and not in company's name. Is it justified and correct? Which standard one is applicable?

I personally think these should be shown on company's balance sheet as per IAS 16, control of assets bringing economic benefits, and conceptual framework.

Thanks...
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Marek Muc
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Re: Motor vehicles in director's name used in company

Post by Marek Muc »

Hi, the cases with small companies that you run into are not well translated into IFRS. Is this entity even reporting under IFRS? Lack of legal ownership does not preclude showing an asset. Leases (IFRS 16) are a great example here.
mehranmichail
Posts: 39
Joined: 14 Apr 2019, 04:54

Re: Motor vehicles in director's name used in company

Post by mehranmichail »

:) thanks for reply. The company follows local GAAP. It's lease accounting is similar to IFRS 16. Yes u r right when it comes to small companies, things could become confusing due to lack of clear cut lines. Let's suppose IFRS apples in this case, even then, for ifrs16 to apply, there should be an agreement. In this case, the vehicles are used without any agreement, so doubtful about applicability of lease.
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Marek Muc
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Re: Motor vehicles in director's name used in company

Post by Marek Muc »

Yep, I assume there is no basis to show these vehicles as assets of the reporting entity. As I wrote before, IFRS are not meant for this kind of entities and you’ll find no specific guidance.

Conceptually speaking, I would show a credit to equity representing a contribution by the owner of the right of use of vehicles for past periods, and a corresponding debit to P/L showing immediate consumption of this right. All of this without showing any assets at a reporting date.

PS. I’m moving this topic to general discussion sub-forum :)
mehranmichail
Posts: 39
Joined: 14 Apr 2019, 04:54

Re: Motor vehicles in director's name used in company

Post by mehranmichail »

Big thanks for helping out in understanding the treatment. I really appreciate it. :)
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