Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › IFRS 16.
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VikasK.
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- July 9, 2023 at 7:37 am #687782
Hello Sir.
Hope you are doing well. I had a doubt in the following question.Owl leases an asset with an estimated useful life of 6 years for an initial period of 5 years, and an optional secondary period of 2 years during which a nominal rental will be payable. The present value of the initial period lease payments is $87,000.
What will be the carrying amount of the right?of?use asset in Owl’s statement of financial position at the end of the second year of the lease?
What I wanted to ask in this question is that.
As per IFRS 16, Lease Term is Non-Cancellable Period during which right to use asset would be with the Lessee and this would include the period covered by an option to extend the lease only if the Lessee is REASONABLY CERTAIN to exercise the option.But question no where states anything which indicates that the Lessee is reasonably certain about exercising the option secondary period of 2 years
July 12, 2023 at 4:21 pm #687881Hi,
If we were only to pay a nominal rental then it would make economic sense to continue to lease the asse for the extra two years.
Thanks
July 13, 2023 at 5:27 pm #687944Thankyou Tutor 🙂
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