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    • You’ll need to be able to calculate the current liability of the lease obligation separate from the long-term liability

      Calculate the obligation at the end of the current year, calculate the obligation at the end of the following year, the difference is the current liability and the obligation at the end of that following year is the long-term liability

      OK?

      NB IAS17 no longer exists and is not examinable – the chapter is left in the notes because the principles still mainly hold good

      IFRS 16 has replaced IAS 17

    • Laba diena, Viktorija … there’s no need to apologise

      I’ve left the lecture in because it clearly shows how to calculates lease interest where it’s necessary to be calculated

      It also shows how to calculate the long-term element of the finance lease year end creditor

      If you ignore the chapter heading (IAS 17) everything else is relevant

      OK?

      If you hit an issue post your question on the Ask ACCA Tutor forum and I shall get back to you

      • Nothing as complicated as we used to have to perform when calculating lease interest and long-term / current liability elements of the amounts due to finance lease liabilities

        It’s more likely the the examiner will ask a theoretical question concerning the exemptions or the appropriateness of treating an item as a lease

        It is possible that calculations will be involved but most probably no where near as detailed as we were used to before the new IFRS

        OK?

        NB this question should have been on the ‘Ask ACCA Tutor’ forum!

  6. Hello Mike,

    Are there any exam tips for this September sitting please?

    And oh by the way, the is this a dagger I see before me is from Macbeth….. I loved that play… you “soliloquyed” it well…. and I love the way you teach.. thank you for the great work

  9. Hi sir,
    I have a confusion about the concept of taking lower of present value of minimum lease payments & fair value, because in notes it says that implicit interest rate causes the present value of lease payments & residual value to be equal to fair value of asset, so how can the present value of lease payments be higher than fair value of asset & if it is then wouldn’t it be understating the liability if we take the lower of i.e. fair value, in the obligations account, because the liability that exists at present is the present value of lease payments & the interest should be accruing on that amount instead of fair value.

  13. Great lecture from a great tutor!
    Thank you sir and please spare some of your time to clarify the following points:

    (a) In the reconciliation of Min Lease Payments with PV section of the notes, you mentioned a GROSS and a NET presentation option. Are both of these required or just one of them?

    (b) In the GROSS presentation method you refer to “Finance Lease Interest not yet accrued”. Is this interest calculated for the remaining years of the lease term? What exactlly is that?

    • Bcz it misleads the users of financial statements,finance leases used to be off balance sheet:no asset recorded no liability recorded hence an increase in ROCE and lower gearing so IAS 17 was introduced

    • I believe it is because in the UK in particular we are followers of a principles based system – rather than a rules based one. In america you have a rules based system meaning that you can in someways legally mislead the users of financial statements as the way that you have presented an item in your accounts is not breaking the law but presents your company in a more favorable light.

      Substance over form is a way of adhering to the qualitative characteristics of the conceptual framework. Faithful representation which is related to this substance over form concept requires that ” financial information must not only represent relevant phenomena but must faithfully represent the phenomena that is purports to represent.”

      In my head I think of substance as a generic categorization e.g Plant and Machinery is capitalized as a Non Current Asset.

      To give an example lets say the law allowed you to categorize something as an orange even though these oranges are not real oranges but round pieces of plastic in an orange skin. What would be the right thing to do for people wanting information about the product you were selling – would it not be misleading to tell people that what you are holding are oranges?

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