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leases

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › leases

  • This topic has 7 replies, 3 voices, and was last updated 1 year ago by P2-D2.
Viewing 8 posts - 1 through 8 (of 8 total)
  • Author
    Posts
  • May 6, 2021 at 4:15 pm #619878
    deekshabee
    Participant
    • Topics: 24
    • Replies: 22
    • ☆

    hello,

    During the year ended 30 September, 20X4 Hyper Co entered into the following
    transactions:
    On 1 October 20X3 Hyper Co acquired under a lease to obtain a right of use asset which
    was initially measured at $340,000. Under the terms of the lease, payment in advance of
    $90,000 was made on commencement of the lease, being the first of five equal annual
    payments. The right of use asset has a five-year useful life. The lease has an implicit
    interest rate of 10%.
    On 1 August 20X4, Hyper Co made a payment of $18,000 for a nine-month lease of an
    item of excavation equipment. Hyper wishes to utilize the exceptions available under IFRS
    16 Leases.
    What amount in total would be charged to Hyper Co’s statement of profit or loss for the
    year ended 30 September 20X4 in respect of the above transactions?

    Sir, I am able to calculate lease interest and depreciation on the plant but I don’t understand what are we supposed to do with the short-term lease(nine-month lease).

    May 8, 2021 at 9:08 am #620023
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6440
    • ☆☆☆☆☆

    Hi,

    Short life asset – The $18,000 is spread over the nine-month lease period, so $2,000 through profit or loss each month. The total amount through profit or loss this year will depend on the number of months the asset has been used for. There will also be a prepayment for the remaining months that have not been expensed.

    Thanks

    May 10, 2021 at 6:06 pm #620241
    deekshabee
    Participant
    • Topics: 24
    • Replies: 22
    • ☆

    Got it, thanks. 🙂

    May 12, 2021 at 7:06 pm #620435
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6440
    • ☆☆☆☆☆

    I knew you would 🙂

    May 16, 2021 at 7:33 pm #620772
    slavyanka1981
    Member
    • Topics: 0
    • Replies: 4
    • ☆

    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

    May 17, 2021 at 7:59 pm #620879
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6440
    • ☆☆☆☆☆

    Hi,

    No, the rules state that payment made at the commencement of the lease are included as part of the ROU asset. You therefore include the 100,000.

    Thanks

    May 17, 2021 at 8:35 pm #620889
    slavyanka1981
    Member
    • Topics: 0
    • Replies: 4
    • ☆

    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.

    May 19, 2021 at 9:57 pm #621121
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6440
    • ☆☆☆☆☆

    Agreed. Always check the dates carefully as it is one of the tricks the examiner can easily use.

  • Author
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