Lease and Employment Benefits

Niagara, a public limited company, operates a national chain of supermarkets. You have been asked to provide advice on how the following transactions should be accounted for in the accounting records for the year ended 30th June 2015.
(a) Niagara does not purchase all of its stores outright. On 1st July 2014, Niagara leased a property with an economic life of 50 years under a 10 year lease. The first year of the lease was rent-free, followed by nine annual lease rentals of £0.3 million payable in advance. The fair value of the property was £10 million and the interest rate implicit in the lease was 6%
(b) Another store, leased under an operating lease, had to be closed on 30th June 2015 due to large losses. There were five years left to run on the lease at an annual rental of £0.5 million. The contract allows Niagara to sub-lease the property and Niagara has identified a potential lessee who is willing to pay £0.1 million per year. Alternatively, a clause in the lease allows Niagara to cancel the lease with immediate effect for a penalty of £1.5 million.
(c) As well as selling food, on 1st January 2015, Niagara purchased a ten year pharmacy licence for £5 million and opened pharmacies in some of its larger stores. As a result, Niagara had to spend £0.5 million to train and recruit pharmacists, £0.3 million on marketing its new products and £1 million on fitting out a new dedicated area of the store for the pharmacy.
(d) Niagara has a policy of purchasing available land in suitable locations outside town centres for potential development of future stores. Niagara does not have a policy of revaluing its land and buildings unless they are investment property. At 30th June 2015, Niagara held the following:
• Land which had cost £20 million and had not yet been developed
• Land on which construction of a new store had started at a total cost of £30 million
• Land which Niagara had purchased but had decided was unsuitable for development of a store and instead during the year constructed residential property for rental income. This land and property construction cost £40 million in total. Construction was completed on 1st January 2015. The fair value of the land and buildings at the year-end was £45 million.
(e) Niagara has a policy of upgrading its computers every five years. On 1st July 2014, Niagara spent £3 million on new hardware, £0.2 million on related installation costs, £0.4 million on the latest version of Windows (the hardware did not include an operating system) and £0.1 million on the latest version of Microsoft Office. From 1st July 2014 to 1st January 2015, the internal IT department developed a new program to incorporate the new pharmaceutical products at a total cost of £0.3 million.
(f) Historically, Niagara has had a problem with high staff turnover due to low salaries and having to work evenings and weekends. To encourage better staff retention, on 1st July 2014, the Board decided to award share option schemes to all 1,000 employees, provided they remained in employment for five years. At 1st July 2014, 20% of employees were expected to leave over the period to 30th June 2019 and at 30th June 2015 this had risen to 25%. The fair value of these options at 1st July 2014 was £2 and this had risen to £3 by 30th June 2015. The number of options per employee is conditional on the average profit over the five years commencing 1st July 2014 as follows:

Average Profit Number of Options
From £1 million up to £1.2 million 100
Above £1.2 million up to £1.4 million 120
Above £1.4 million up to £1.6 million 140
Above £1.6 million up to £1.8 million 160
Above £1.8 million up to £2 million 180

Profit for the year ended 30th June 2015 was £1 million and profit for the following four years was forecast to rise by £0.2 million per year. The award of the options was also conditional on the share price reaching at least £8 per share by 30th June 2019. The year-end share price was £6.

Required:
Discuss, showing calculations where appropriate, how the above items should be dealt with in the financial statements of Niagara for the year ended 30th June 2015.

Note: the cumulative 9 year annuity factor at 6% is 6.802.