Fueled by Famo Limited is a rapidly growing racing fuel cell manufacturing company. The company

supplies racing fuel cells for racing in South Africa which is regulated by Motorsport South Africa. However,

due to the current economic climate in South Africa, the company is experiencing cash flow problems. As

a result, a decision was made to lease a manufacturing plant and a state$-$of$-$the$-$art computer to design its

racing fuel cells.

Manufacturing Plant

New regulations in South Africa have forced Fueled by Famo Limited to upgrade and align the design of

their racing fuel cells. In order for Fueled by Famo Limited$$s racing fuel cells to meet the new regulations,

a new manufacturing plant will be required. Fueled by Famo Limited had to look into new ways of financing

this manufacturing plant.

A contract was entered into with AfriCNC Ltd to provide the company with a manufacturing plant that will

produce racing fuel cells in line with the new regulations.The contract was signed on $20$ December $2022,$ while the manufacturing plant would be delivered to

Fueled by Famo Limited on the $1$ January $2023$ and will be installed on Fueled by Famo Limited$$s premises

on this day. If the manufacturing plant needs to be repaired, AfriCNC will provide an alternative

manufacturing plant in the interim until the original manufacturing plant has been repaired.

The manufacturing plant will be configured by Fueled by Famo Limited to ensure that the racing fuel cells

will be manufactured in line with the requirements of the new regulations. During the period of the contract

AfriCNC will not be allowed to retrieve the manufacturing plant or use it$.$The term of the contract is $5$ years and equal instalments of R$500000$ will be paid annually in arrears on

$31$ December. The fair value of the manufacturing plant on the date of signing the contract is R$1716540.$

The implicit interest rate in the contract is $14\%.$ The expected useful life for the plant is estimated at $7$

years. Fueled by Famo Limited will not obtain ownership at the end of the lease term.

Discuss whether the Manufacturing Plant contract is$,$ or contains a lease as per IFRS $16$ Leases