Question Tag: Finance leases

In the year 2000, Amotekun State of Nigeria established two State Universities University of Education (ASUE), to cater for the indigenes of the state. The following information relates to each of the universities:
a. The Bursar of Amotekun State University, Oke-Mosan, delegated the preparation of Non-current assets schedule to be included in the final accounts of the University for the year ended December 31, 2018, to one of the Deputy Bursars in the Bursary Department.
In the discharge of the assignment, the Deputy Bursar reviewed the following documents:

• International Public Sector Accounting Standards (IPSAS).
• Previous year’s financial report.

He was able to obtain the following information:

(i)

• Non-current assets register.
• Valuation reports, etc.

(i) It is the policy of the University to charge a full year’s depreciation on assets irrespective of the month of purchase or revaluation during the year, while no depreciation is charged on assets disposed of during the year.

(ii) Equipment on lease is depreciated equally over the period of the lease.

(iii) Land and buildings were professionally revalued during the year by Parisco & Associates, a firm of Chartered Surveyors and Valuers, and approved by the State Ministry of Works and Housing. The valuation, which was based on the open market value, produced a revaluation surplus of N150,000,000 over the carrying amount as at January 1, 2018.

(iv) The University purchased plant and machinery which was imported from the United Kingdom at a cost of N430,500,000. Installation and transportation costs to the University amounted to N20,500,000.

(v) The Deputy Bursar that prepared the non-current assets schedule last year classified some of the computer equipment purchased on May 15, 2017, costing N26,000,000 as office equipment. A reclassification is required in the current year.

(vi) Office furniture and fittings costing N12,250,000 were disposed of during the year for N11,500,000, which resulted in a profit of N750,000.

(vii) The University entered into an equipment lease agreement with Ode Finance Limited; the terms and conditions of the finance lease are as follows:
Principal sum: N45,000,000
Lease period: 5 years
Lease rentals: N10,000,000 p.a.
(viii) During the year, the University acquired a fleet of vehicles at the cost of N50,000,000. The State Government financed this acquisition.

Required: i. In accordance with IPSAS 13, identify FIVE features of a finance lease. (5 Marks) ii. Prepare the non-current assets schedule of Amotekun State University suitable for publication. (15 Marks)