Answered step by step
Verified Expert Solution
Question
1 Approved Answer
*9.9 IFRS16 Leases replaces IAS17 Leases for accounting periods beginning on or after 1 January 2019. The main aim of the new standard is to
*9.9 IFRS16 Leases replaces IAS17 Leases for accounting periods beginning on or after 1 January 2019. The main aim of the new standard is to improve lessee accounting so that a lessee's financial statements provide a more faithful representation of the lessee's financial position than was previously the case. (a) Outline the way in which IFRS16 requires lessees to account for leases and explain why this provides a more faithful representation (especially for leases which would have been classified as operating leases by IAS17). (b) Explain the recognition exemptions available in IFRS16. Are lessees required to take advantage of these exemptions? On 1 April 2019, Triste Ltd (which prepares accounts to 31 March) enters into a three- year lease of a motor lorry. The company is required to make a lease payment of 50,000 on 1 April 2019 and three further lease payments of 42,500 each on 31 March 2020, 2021 and 2022. The company also incurs initial direct costs of 940. Legal title to the lorry will be transferred to Triste Ltd at the end of the lease term. The rate of interest implicit in the lease is 11% per annum. (c) Explain (with calculations) how this lease should be accounted for in the financial statements of Triste Ltd for each of the three years to 31 March 2022. (d) How should the lessor account for this lease? Assume that the lorry has a fair value at inception of 153,000 and that the lessor incurs initial direct costs of 870
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started