Winger plc has entered several new financing transactions during the year as part of its expansion, the details of which are shown below.

• On 1 January 2020 Winger plc issued 5m 6% loan notes, incurring 200,000 issue costs in the process. These are repayable in three years at a premium, which gives them an effective rate of 9%.
• On 1 January 2020 Winger plc also issued 6m 2% convertible bonds. These bonds can be converted into equity shares by the holder. If not converted, these will be repayable in three years. The market rate of similar bonds is 8%.
• On 1 January 2020 Winger plc entered into an agreement to rent a building under a short three-year lease. Under the terms of the lease, Winger plc will pay 1.5m a year annually on 1 January each year, beginning on 1 January 2020. The total payments have a present value of 4.175m, discounted at Wingers effective rate of 8%. The accountant would like to know if they can utilise the short-term lease exemption per IFRS 16 Leases in respect of this agreement.

Requirements

1. Explain the correct financial reporting treatment and produce financial statement extract for the items above for the year ended 31 December 2020.