[jamioio]

Can someone offer the mark breakout for question 1. I was in UK version.

[jamioio]

@sr100 said:
But what affect would a lease have on the gearing ratio?

IFRS 16 Leases states that a lease is probably a finance lease if one or more of the following apply:
1) The lease term (including any secondary periods) is for the major part of the asset’s economic life
2) At the inception of the lease, the present value of the lease payments amounts to at least substantially all of the fair value of the leased asset

Both of these were found within the scenario text.

The property could therefore be de-recognised as an asset, and re-recognised as a receivable discounted to present value.

The discounting will lower the value of non-current assets and push gearing over the allowed limit. Further, the receivable is broken into non-current and current, again affecting the gearing ratio.

I think this question is open to interpretation, perhaps the examiner will just want to see your point, and that it is well explained. I certainly appreciate the argument with regards to level 1 and 2 inputs.

Personally, I found the IFRS 13 Fair Values element to be more useful in the ethical issues part of the question.

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