Question
Delicious Chocolate Company produces chocolate candies. It has a non-cancelable lease on a building in North Carolina that is used for production. The lease expires
Delicious Chocolate Company produces chocolate candies. It has a non-cancelable lease on a building in North Carolina that is used for production. The lease expires on December 31, 2011 and is classified as an operating lease for accounting purposes. The annual lease payment is $120,000. In October 2010, the company closed it North Carolina factory and moved production to Mexico. The company does not believe it will be possible to sublease the manufacturing facility. As a result of moving production to Mexico, the company reduced labor costs by $40,000 in 2010. The company estimates the move to Mexico will result in labor cost savings of at least $180,000 in 2011.
Required: Determine what accounting under IFRS, if any, should be done on December 31, 2010 related to this lease.
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