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Hi P2
I could not calculate the Lease Liability and the Interest Expenses of this example. Can you please help?
A leases a car for a period of four years starting on 1 Jan 20×9. The investment value is CU35,845. The lease requires payments of CU668 on a monthly basis for the duration of the lease term (i.e., CU8,016 pa). The annual lease component of the lease payments is CU6,672 and the service component is CU1,344. The residual value of the car at the end of the lease term is CU14,168. There is no option to renew the lease or purchase the car, and there is no residual value guarantee. The rate implicit in the lease is 5%. The net present value of the lease payments using a 5% discount rate is CU24,192.
IFRS 16 – Impact on financial position and income
Jan 20×9 Dec 20×9 Dec 20y0 Dec 20y1 Dec 20y2 Total
Lease liability (24,192) (18,580) (12,687) (6,498) 0 Interest exp 0 1,083 797 496 120Hi,
You would need to convert the annual interest rate to a monthly rate as the payments are made monthly. I doubt you would get anything that challenging in the exam, you would be given the monthly rate.
It also isn’t clear if the payments are in advance or in arrears, which is important too.
Thanks
Hi
Thanks very much for this.Interest expenses seems to be incurred in December which might be in arrears. But I could not get the figures. Can you please show me the calculation of the Lease Liability and the Interest Expenses.
IFRS 16 – Impact on financial position and income
Jan 20×9 Dec 20×9 Dec 20y0 Dec 20y1 Dec 20y2 Total
Lease liability (24,192) (18,580) (12,687) (6,498) 0
Interest exp 0 1,083 797 496 120Thanks
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