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Thanks a lot, I think that the date of payment for advance payments that one year after the commencement date is confusing, should be careful with it.
Hi,
I am struggling to understand the following:
On 1 April 20×7 Fino Co increased the operating capacity on it’d plant. On the recommendation of the finance director, Fino Co entered into an agreement to lease the plant from the manufacturer.
An initial payment is made in 1 April 20×7 and the PV of the future lease payments at that date is 173 500. Payments in respect of the lease are made in advance and are 100 000 per annum, commencing on 1 April 20X8. Fino Co incurred initial direct costs of 20 000 to set up the lease and receive a lease incentives from the manufacturer totalling 7 000.Question: What is the initial costs of the RoU asset as at 1 April 20×7?
In the answer the RoU assets are calculated by adding 100 000 of advance payments and are equal to 286 500. Why? From my point of you the advance payments should not be added. Thanks