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what aspects should i look at Hi J Accountant, We are in the process of acquiring a new packaging machine for our Bloemfontein operation at

what aspects should i look at

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Hi J Accountant, We are in the process of acquiring a new packaging machine for our Bloemfontein operation at the beginning of our next financial year (1 July 2020). We haven't yet decided if we're going to lease the machine or buy it outright. If we lease it for three years, we will pay 3 annual instalments of R688 362 in arrears at an interest rate of 6%. If we simply buy the machine outright, this will cost us R1 840 000 (Including Vat) and we expect the useful life of the asset to be 5 years. In the past we have always bought our machines outright, but given the tough the matter? economic times, I'm wondering if this is still the right approach. What are your thoughts on Further, I believe there is a new IFRS accounting standard out for leases? A colleague of mine explained that, should we decide to lease the asset above, we can simply expense the lease payments over the lease term on the straight line method? Is this correct and if not, how should I account for the transaction? Looking forward to your response, Regards FD Awesome Eggs REQUIRED: Draft an email response to the FD of Awesome eggs in which you address ALL of the following: a) Motivate a recommendation to either lease or buy the packaging machine. Please note: - Your typed solution SHOULD NOT exceed 500 words. Refer to the instructions harding word limits

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