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Leases IFRS 16

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Leases IFRS 16

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • April 10, 2021 at 2:20 pm #616669
    suleymanabuzerli
    Member
    • Topics: 84
    • Replies: 32
    • ☆☆

    On 1 January 20X4, Stark entered into a sale and leaseback of its property. When it was sold,
    the asset had a carrying amount of $6 million and a remaining life of 10 years Stark sold the
    asset for $7 million and leased it back on a 10 year lease, paying $1 million on 31 December
    each year. The lease carried an implicit interest rate of 7%.
    What is the total expense that should be recorded in the statement of profit or loss for the
    year ended 31 December 20X4?
    $________________ ,000

    Hello,Sir

    why in this question,payment for 1 million $ is not recognized in Profit/Loss statement?

    April 17, 2021 at 8:43 am #617990
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    Hi,

    Although the asset is “sold” it is still effectively our asset when we lease it back and so the proceeds are treated as a loan. The $1 million payment is the re-payment of the loan and reduces the outstanding liability and is not expensed through profit or loss.

    Thanks

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