IAS17- Leases

Lessor Ltd is currently in the opencast mining industry for the mining of granite. The company makes use of hydraulic equipment to break the granite into smaller parts. Lessor Ltd was obligated to purchase new hydraulic equipment in order to increase their output capacity. The hydraulic equipment that was used by Lessor Ltd until 30 June 2012, was purchased on 30 June 2011 for R734 000. This hydraulic equipment was available for lease from 30 June 2012.
The management team of Lessee Ltd entered into a lease agreement with Lessor Ltd on 30 June 2012 to lease the hydraulic equipment. Commission Earners Ltd introduced Lessor Ltd and Lessee Ltd to each other in order to lease the equipment to Lessee Ltd and charged R36 700 for the service. The commission was paid by Lessor Ltd.

The lease agreement stipulates the following:
Cost/selling price of the equipment on 30 June 2012
R720 000,00
Instalments are payable every six months in advance. The first instalment is payable on 30 June 2012
R135 097,69
Period of Lease
3 years
Nominal interest rate
10,00% per annum
Effective interest rate
10,25% per annum
Ownership will be transferred to the lessee at the end of the lease term at no additional cost.
The year end of both these companies is 28 February.

ACCOUNTING FOR FINANCE LEASE IN THE BOOKS OF THE LESSEE

i would like to request your assistance or viewpoint on the following:

*should we adjust the interest rate as a result of the payment of 36 700.00 by the lessor.

*when preparing the reconciliation for financial liabilities, how do we calculate the amount that should be disclosed within year 1 and up to 5 years. considering the fact that the lease is payable in advance (half yearly).

*how does the financial year end (28 Feb) and the lease payment period affect the disclosure of the fianance costs and present values in the reconcialation table.

thanks for your assistance.