Question 3 Adrian is a newly hired Account Executive in Kristal Holdings. He recently came across few scenarios while updating the accounts. Adrian came to seek your advice since you have been working for some time in a similar industry as an Account Executive. Adrian: You : Adrian: You : Adrian: You : Adrian: Required: Assalamualaikum. Hi, do you have a minute? Wa'alaikumussalam. Sure. What's up? I have come with a scenario whereby the company hired five cars for an agreement of five years. The insurance and maintenance of the cars are the responsibilities of the lessor. The company is responsible for providing driver and fuel only. The Managing Director insisted this is an operating lease due to maintenance service element. What do you suggest I do? Okay. Is there anything else? As a matter of fact. There is... What is it? How does one deal with existing operating leases in place when one adopts IAS 16/MFRS 116? Further, when first time adoption of the standard occurs is there an adjustment required for the comparatives of the prior year? a) Advise Adrian on how best to determine whether the lease is finance or operating, with respect to the standards that are related to leases, i.e. MFRS 117 Leases and MFRS 16. (15 marks) b) Identify the appropriate measure for first time adoption when transitioning from operating lease to finance lease. c) What about hire purchase? Is it out or in the scope of MFRS 16? (7 marks) (3 marks)