The initial recognition of a right to use asset is PV of lease liability + direct costs. Nowhere in the notes does it say to include any lease payments.
For lease liability if payments are made in advance the calculation is (PV of lease liability less lease payment) x (1+interest rate). For payments made in arrears the calculation is ((PV of lease liability x 1+interest rate) less lease payment))
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Emil·
Thank you so much! unfortunately not stated anywhere (even in the books) this formula, was crazy until I figure out.
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Vee·
Hie I would like to ask why you did not add 5000 paid in advance on the calculation of the right of use of asset.
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Vee·
Hie I would like to ask why did not add 5000 paid in advance on the calculation of the right of use of asset.
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Andile·
Hi
The question didnt say it was paid and if you look at the prevent value its calculated on 5 years discount rate ...i think if you are given a discount rate just check and the present value check the rate they have used to calculate it to see if year one is included or not
For lease liability if payments are made in advance the calculation is (PV of lease liability less lease payment) x (1+interest rate). For payments made in arrears the calculation is ((PV of lease liability x 1+interest rate) less lease payment))
The question didnt say it was paid and if you look at the prevent value its calculated on 5 years discount rate ...i think if you are given a discount rate just check and the present value check the rate they have used to calculate it to see if year one is included or not