Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Show how you would make an appropriate adjustment to the liability side of EasyJets balance sheet if operating leases for aircraft were all classified as
Show how you would make an appropriate adjustment to the liability side of EasyJets balance sheet if operating leases for aircraft were all classified as finance leases. Use the following assumptions in your calculation.
An incremental borrowing interest rate is 10%.
The average remaining life of the operating leases is 6 years. The cash flows for year 2-year 5 are evenly spread over the period.
All scheduled cash flows occur at year end.
Total liabilities reported on the 2014 balance sheets are 2,310 million.
24 Leasing commitments Commitments under operating leases Aircraft Other 2014 million 2013 million 2014 million 2013 million 105 110 1 2 Total commitments under non-cancellable operating leases due: Not later than one year Later than one year and not later than five years Later than five years 286 293 3 4 68 102 3 3 459 505 7 9 easyJet holds 72 aircraft (2013: 72 aircraft) under operating leases, with initial lease terms ranging from five to ten years. easyJet is contractually obliged to carry out maintenance on these aircraft, and the cost of this is provided based on the number of flying hours and cycles operated. Further details are given in the critical accounting policies section of note 1. 24 Leasing commitments Commitments under operating leases Aircraft Other 2014 million 2013 million 2014 million 2013 million 105 110 1 2 Total commitments under non-cancellable operating leases due: Not later than one year Later than one year and not later than five years Later than five years 286 293 3 4 68 102 3 3 459 505 7 9 easyJet holds 72 aircraft (2013: 72 aircraft) under operating leases, with initial lease terms ranging from five to ten years. easyJet is contractually obliged to carry out maintenance on these aircraft, and the cost of this is provided based on the number of flying hours and cycles operated. Further details are given in the critical accounting policies section of note 1Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started