–––––––– –––––––– ––––––––
EQUITY AND LIABILITIES
Equity
Share capital 20,000 20,000
Revaluation reserve 3 10,000 –
Retained earnings 32,278 34,895 –––––––– ––––––––
Total equity 62,278 54,895 –––––––– ––––––––
Non-current liabilities
Long-term borrowings 5 25,000 25,000
Provisions 1,000 1,250
Finance lease payable 5,000 – –––––––– ––––––––
31,000 26,250 –––––––– ––––––––
Current liabilities
Bank overdraft 7 1,300 –
Trade and other payables 3,500 3,485 –––––––– ––––––––
4,800 3,485 –––––––– ––––––––
Total liabilities 35,800 29,735 –––––––– ––––––––
Total equity and liabilities 98,078 84,630 –––––––– –––––––– –––––––– ––––––––
Notes:
2. On 1 July 2011, Oak plc entered into a lease which has been accounted for as a finance lease and
capitalised at €5 million. The leased property is used as the head office for Oak plc’s new website
development and sales division. The lease term is for five years and the fair value of the property at the
inception of the lease was €20 million
I want to know what is the audit risk in above lease part?
Ask the Tutor ACCA AAA
Oak Co lease
7y ago#1You are looking at a Q from D11 which is pre-IFRS 16 Leases and so obsolete with regard to the accounting for leases (there is no longer a distinction between finance/operating leases in lessee accounting). OpenTuition strongly recommends that you prepare with a current edition Approved Revision Kit which will have adapted such questions to the current exam style and standard of the AAA exam and be technically update in respect of financial reporting issues.
If you use old questions you therefore have to ignore elements that are obsolete.
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