Need to identify the financial reporting issue below:

On January 1, 2019, the company leased its administrative building under a contract wherein the company will obtain ownership of the building at the end of the 20-year lease for a nominal amount. Management decided to expense the lease payment of $3,000,000 for 2019 (paid on January 1, 2019). The building would have been capitalized at $30 million if treated as a capital lease. The building has a remaining economic life of 25 years. The interest for 2019 would have amounted to $2.45 million.

The depreciation expense was $2 million lower than CCA in 2019, not including any impact from transaction above. The tax rate enacted for 2020 and beyond was increased to 32%.

Company reports under IFRS

Income Statement

Sales $100,000,000

COGS ( $50,000)

Gross profit $50,000

Expenses:

Depreciation $6,000,000

Pension $2,000,000

Operating $28,000,000

Net Pretax Income $14,000,000

Income tax-estimate (30%) $4,200,000

Net income $9,800,000