Background Johan, a public limited company, operates in the telecommunications industry. It has a reporting date of 30 November 20X7. Telecommunications is a capital intensive industry with fierce competition Licence Johan purchased a new five year telecom licence on 1 December 20x6 for $120 million that enables it to provide high-speed network services. Johan is not permitted to sell the licence. The related network assets and infrastructure became ready for use on 1 December 20x6. Johan expects its customer base to grow over the period of the licence but is disappointed with its market share for the year to 30 November 20X7. The licence agreement does not deal with renewal. Johan hopes that the regulator will renew the licence for another five years at the end of the initial term as long as certain criteria regarding network build quality and service quality are met. Johan has no experience of the charge that will be made by the regulator for this renewal but other licences have been renewed at a nominal cost. The licence is currently stated at its original cost of $120 million in the statement of financial position under non-current assets. In Johan's jurisdiction, the $120 million purchase price was permitted as a tax allowable expense. The tax rate is 20%. The directors wish to know how to account for the above information Sale and leaseback On 30 November 20X7, Johan sold freehold office premises for its fair value of $10 million and leased it back on a 5 year lease term. The remaining useful life of the premises was 30 years and so the directors concluded that the transfer represented the satisfaction of a performance obligation. At 30 November 20X7, the office had a carrying amount of $3.2 million, and the present value of the lease payments due was $2 million. Johan's first lease payment will occur in 20x8. The directors of Johan need advice on accounting for this sale and leaseback transaction in the year ended 30 November 20X7. Pension Johan operates a defined benefit pension scheme for its employees. As per the terms of their contract, employees will receive an annual pension income upon retirement. The annual amount they will receive is calculated as follows: Career average salary x (Years employed/60 years) Johan's directors are aware that, in accordance with IAS 19 Employee Benefits, remeasurement components relating to a defined benefit pension scheme are recorded in other comprehensive income and are not reclassified to profit or loss in the future. They are unsure if this is consistent with the Conceptual Framework Required: (a) (i) With respect to the licence, respond to the directors' request. (10 marks) (ii) With respect to the sale and leaseback, respond to the directors' request. (6 marks) (b) (i) Explain why Johan's pension scheme meets the definition of a defined benefit scheme, as per IAS 19 Employee Benefits. (4 marks) (ii) Discuss whether the accounting treatment of the remeasurement component is consistent with the principles in the Conceptual Framework. (5 marks) (Total: 25 marks)