A lessee has leased a warehouse for a contract period of 5 years, the monthly rent being 5000 us dollars . There is no leasehold improvements , just a plain warehouse that is leased.
The contract is for 5 years , however after a period of two years , the lessee has the right to terminate the lease by giving a 3 months notice period.
If the lessee terminates the lease prior than two years , they will incur a penalty of 12 months of rent.
In this case what is the non cancellable period ?
I do know that it is two years , but the penalty incurred will only be for 12 months of rent.
And my main question is it necessary to apply lease accounting ? , as the penalty will only be for 12 months , if terminated before 2 years.
Ask the Tutor ACCA SBR
Application for ifrs 16 for the following contract
2y ago#11. I don't understand why this is US $. Exam does not refer to individual currency.
2.Spirit of IFRS 16 - this is a lease :)
3. Non-cancellable period - as you say 2 years
Trusting that this is an SBR question - it's just that I don't recognise it. :)
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