Provide the definition of a lease and describe the two types of leases.

b) How has IFRS 16 changed for lessees and lessors in relation to distinguishing between the two types of leases?

c) Identify five practical expedients and exemptions allowed in IFRS 16 and describe how they are used.

d) List the five criteria under IFRS 16 for determining if a lease is finance lease.

2. Comex Limited, as the lessee, has entered into two new lease contracts with the Liveter Group Ltd as at January 1, 2020. The company's year-end is December 31st.

Lease 1 - The first lease is for office furniture with a lease term of 5 years and lease payments of $1,000 per annum in advance. Comex will keep the furniture at the end of the lease term.

Lease 2 - The second is for machinery with a lease term of 5 years starting January 1, 2020 and payments of $10,000 payable annually on January 1st. Comex incurs indirect costs at January 1, 2020 amounting to 3,200. The machinery will revert to the Liveter Group Ltd at the end of the lease term. The machinery has an unguaranteed residual value of $8,000. The economic life of the machinery is 6 years. Comex uses the straight-line method for depreciation and an incremental borrowing rate of 5% per annum. (The implicit rate is not known).

Required

a) As the financial controller for Comex you have been asked by the CFO to correctly classify the two leases, prepare the amortization schedules as required and journal entries for the year ended December 31, 2020.

b) Complete the same process in a) above as the financial controller for Liveter Group Ltd for lease 2 only.