On 1 January 2023, Crimmock Ltd (which prepares accounts to 31 December) enters into a four-year lease of office machinery. The company is required to make four lease payments of £30,000 and these fall due on 1 January 2023, 2024, 2025 and 2026. The rate of interest implicit in the lease is 9% per annum.
Lease payments are made at the beginning of each year, so the finance charge for each year is calculated at 9% of (liability at the start of the year – lease payment). Explain how this lease should be accounted for by Crimmock Ltd in accordance with the requirements of IFRS16 Leases.