Leases – NBC Institute

FR – NOV 2016 – L2 – Q6b – Leases (IFRS 16)

Calculation of present value of lease payments and determination of lease type for equipment leasing arrangement.

Question

Ijaw Oil Plc has entered into agreement to lease a plant and equipment from Ogoni Leasing Company Limited. The lease period of the plant and equipment is six (6) years. The agreement provides that Ogoni Leasing Company Limited will incur upkeep expenses. The cost of the plant and equipment is N900,000,000,000. The economic useful life is 20 years. Ijaw Oil Plc is to pay annual lease rentals of N150,000,000 in advance over 6 years after which the plant and equipment revert to the lessor. The implicit interest rate is 22% per annum which is stated below:

Year	0	1	2	3	4	5	6
PV(N1)	1.0000	0.8197	0.6719	0.5507	0.4514	0.3700	0.3033

You are required to:

i. Calculate the present value of the lease rental of the equipment. (4 Marks)

ii. Identify with justification the kind of lease involved (3 Marks)

iii. Advise on how to treat the lease rentals paid by Ijaw Oil Plc. in the financial statements (1 Mark)

Answer

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Tags: Lease Classification, Lease Payments, Lease Treatment, Lease Type, Present Value
Level: Level 2

Topic: Leases
Series: NOV 2016

FR – NOV 2016 – L2 – Q6a – Leases (IFRS 16)

Question tests understanding of the two types of leases under IAS 17 and their key differences.

Question

Identify the TWO kinds of leases stipulated in IAS 17 and compare in tabular form with at least FIVE differences.

Answer

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Tags: Finance lease, Lease Accounting, Lease Classification, Operating Lease
Level: Level 2

Topic: Leases
Series: NOV 2016

FR – Nov 2023 – L2 – Q2b – Financial Reporting Standards and Their Applications

Explain the financial reporting treatment of a lease transaction for Fugu Ltd in accordance with IFRS 16.

Question

Fugu Ltd (Fugu) operates in the automobile industry. The following transaction relates to Fugu for the year-end 31 July 2023: On August 1, 2022, Fugu entered into a ten-year lease, agreeing to pay GH¢3 million annually in arrears in exchange for the use of a building. The present value of the minimum lease payments was GH¢20.13 million at 1 August 2022, and the useful economic life of the building was 50 years. Fugu’s cost of capital is 8%.

Required:
In accordance with IFRS 16: Leases, show the financial reporting treatment of the above transactions in the financial statements of Fugu for the year ended 31 July 2023.

Answer

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Tags: Financial Reporting Treatment, IFRS 16, Leases, Present Value, Right-of-Use Asset

Topic: Financial Reporting Standards and Their Applications, Leases
Series: NOV 2023

FR – NOV 2016 – L2 – Q6b – Leases (IFRS 16)

Calculation of present value of lease payments and determination of lease type for equipment leasing arrangement.

Question

Year	0	1	2	3	4	5	6
PV(N1)	1.0000	0.8197	0.6719	0.5507	0.4514	0.3700	0.3033

You are required to:

i. Calculate the present value of the lease rental of the equipment. (4 Marks)

ii. Identify with justification the kind of lease involved (3 Marks)

iii. Advise on how to treat the lease rentals paid by Ijaw Oil Plc. in the financial statements (1 Mark)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Lease Classification, Lease Payments, Lease Treatment, Lease Type, Present Value
Level: Level 2

Topic: Leases
Series: NOV 2016

FR – NOV 2016 – L2 – Q6a – Leases (IFRS 16)

Question tests understanding of the two types of leases under IAS 17 and their key differences.

Question

Identify the TWO kinds of leases stipulated in IAS 17 and compare in tabular form with at least FIVE differences.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Finance lease, Lease Accounting, Lease Classification, Operating Lease
Level: Level 2

Topic: Leases
Series: NOV 2016

FR – Nov 2023 – L2 – Q2b – Financial Reporting Standards and Their Applications

Explain the financial reporting treatment of a lease transaction for Fugu Ltd in accordance with IFRS 16.

Question

Required:
In accordance with IFRS 16: Leases, show the financial reporting treatment of the above transactions in the financial statements of Fugu for the year ended 31 July 2023.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Reporting Treatment, IFRS 16, Leases, Present Value, Right-of-Use Asset

Topic: Financial Reporting Standards and Their Applications, Leases
Series: NOV 2023

Topic: Leases

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FR – NOV 2016 – L2 – Q6b – Leases (IFRS 16)

Calculation of present value of lease payments and determination of lease type for equipment leasing arrangement.

FR – NOV 2016 – L2 – Q6a – Leases (IFRS 16)

Question tests understanding of the two types of leases under IAS 17 and their key differences.

FR – Nov 2023 – L2 – Q2b – Financial Reporting Standards and Their Applications

Explain the financial reporting treatment of a lease transaction for Fugu Ltd in accordance with IFRS 16.

FR – NOV 2016 – L2 – Q6b – Leases (IFRS 16)

Calculation of present value of lease payments and determination of lease type for equipment leasing arrangement.

FR – NOV 2016 – L2 – Q6a – Leases (IFRS 16)

Question tests understanding of the two types of leases under IAS 17 and their key differences.

FR – Nov 2023 – L2 – Q2b – Financial Reporting Standards and Their Applications

Explain the financial reporting treatment of a lease transaction for Fugu Ltd in accordance with IFRS 16.

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FR – NOV 2016 – L2 – Q6b – Leases (IFRS 16)

Calculation of present value of lease payments and determination of lease type for equipment leasing arrangement.

You're reporting an error for "FR – NOV 2016 – L2 – Q6b – Leases (IFRS 16)"

FR – NOV 2016 – L2 – Q6a – Leases (IFRS 16)

Question tests understanding of the two types of leases under IAS 17 and their key differences.

You're reporting an error for "FR – NOV 2016 – L2 – Q6a – Leases (IFRS 16)"

FR – Nov 2023 – L2 – Q2b – Financial Reporting Standards and Their Applications

Explain the financial reporting treatment of a lease transaction for Fugu Ltd in accordance with IFRS 16.

You're reporting an error for "FR – Nov 2023 – L2 – Q2b – Financial Reporting Standards and Their Applications"

FR – NOV 2016 – L2 – Q6b – Leases (IFRS 16)

Calculation of present value of lease payments and determination of lease type for equipment leasing arrangement.

You're reporting an error for "FR – NOV 2016 – L2 – Q6b – Leases (IFRS 16)"

FR – NOV 2016 – L2 – Q6a – Leases (IFRS 16)

Question tests understanding of the two types of leases under IAS 17 and their key differences.

You're reporting an error for "FR – NOV 2016 – L2 – Q6a – Leases (IFRS 16)"

FR – Nov 2023 – L2 – Q2b – Financial Reporting Standards and Their Applications

Explain the financial reporting treatment of a lease transaction for Fugu Ltd in accordance with IFRS 16.

You're reporting an error for "FR – Nov 2023 – L2 – Q2b – Financial Reporting Standards and Their Applications"

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