IFRS 16

Question 1

What should lessee initially recognise? (aspects of lease)

Answer 1

The right-of-use asset and lease liability

Question 2

RIght-of-use asset measurement?

Answer 2

Measured at amount of lease liability + initial direct costs incurred by lessee + deposit paid

Question 3

Examples of initial direct costs incurred by lessee?

Answer 3

Lease liability
Estimated costs for dismantling
Payments less incentives before commencement date

Question 4

Lease liability measurement? (PV)

Answer 4

Measured at PV of lease payment payable over lease term, discounted at rate implicit in lease

Question 5

Subsequent right-of-use asset measurement?

Answer 5

Cost - accumulated depreciation

Question 6

Subsequent lease liability measurement?

Answer 6

Financial liability at amortised cost

Question 7

What is depreciation for right-of-use asset based on?

Answer 7

Depreciation based on earlier of useful life and lease term

Question 8

Lessor agreeing to reimburse is?

Answer 8

A lease incentive

Question 9

Right-of-use asset initial double entry?

Answer 9

Debit Asset PV amount
Credit Liability PV amount

Question 10

PV amount adjustments?

Answer 10

Add direct inital costs
Add Other direct costs (Initial payment)
Subtract incentives received

Question 11

What is charged to SPL?

Answer 11

Interest + Depreciation charge

Question 12

How should profit be treated in a sale and leaseback?

Answer 12

Recognise proportion relating to right-of-use transferred

Question 13

Payment in arrears treatment?

Answer 13

Deducted from the present value

Question 14

What goes in SFP?

Answer 14

Right-of-use
Lease liability

Question 15

Calculate right-of-use asset for every year SFP?

Answer 15

Deduct depreciation from carrying value every year

Question 16

What goes in SPL

Answer 16

Interest
Depreciation

Question 17

How is depreciation calculated?

Answer 17

PV after adjustments / useful life

Question 18

Short-term lease?

Answer 18

Payment * months covered/length of lease

Question 19

Calculate liability in advance

Answer 19

present value (no cash payments) - annual lease payments + interest (SPL) = c/f (SFP)

Question 20

How is non-current liability calculated?

Answer 20

b/f - current liability

Question 21

When does a sale and leaseback transaction occur/

Answer 21

When seller transfers an asset to a buyer who then leases asset back to seller (lessee)

Question 22

If transfer is not sale (seller-lessee)

Answer 22

Continue to recognise asset (at CV and then depreciate)
Recognise financial liability (= proceeds)

Question 23

If transfer is not sale (buyer-lessor)

Answer 23

Do not recognise the asset
Recognise financial asset (= proceeds)

Question 24

What is the company that sells the asset referred to as?

Answer 24

Seller-lessee. As whoever sells must lease it back

Question 25

If transfer is sale (seller-lessee)

Answer 25

Derecognise the asset. Recognise sale at FV Recognise lease liability (PV of lease rentals) Recognise right-of-use asset (whjat it's wroth based on proceeds received and what previous carrying value was) Gain/loss transferred to buyer

Question 26

What does performance obligations not satisfied mean?

Answer 26

No sale

Question 27

What does performance obligations satisfied mean?

Answer 27

Sale

Question 28

Recording proceeds in a sale?

Answer 28

Debit Bank

Question 29

Derecognise asset in a sale?

Answer 29

Credit Asset (CV amount)

Question 30

Record liability in a sale?

Answer 30

Credit liability (PV amount)

Question 31

Right of use asset in a sale?

Answer 31

Proceeds - PV = Transferred (OPTIONAL) Previous CV * (percentage of (PV/Proceeds))

Question 32

Gain/loss for SPL

Answer 32

(Proceeds - liability) - (Derecognise asset - right of use asset)

Question 33

If proceeds are less than fair value of asset or lease payments are less than market rental (below market terms)

Answer 33

Accounted for as a prepayment of lease payments

Question 34

If proceeds are less than fair value of asset or lease payments are less than market rental (above market terms)

Answer 34

Accounted for as additional financing provided to lessee

Question 35

Period for depreciating a right-of-use asset?

Answer 35

Commencement of lease to shorter of end of lease term and end of useful life for plant

Question 36

Lease liability included for one year?

Answer 36

PV + interest

Question 37

How are lease instalments accounted for?

Answer 37

As current liabilities

Question 38

What is meant by in arrears?

Answer 38

Payments are made at the end of the lease period. Subtracted from PV

Question 39

What is meant by in advance?

Answer 39

Payments are made at the start of the lease period. Subtracted from PV

Question 40

Calculate gain on rights retained?

Answer 40

Gain * (PV/Fair value)

Question 41

Calculate gain on rights transferred

Answer 41

Total gain - gain on rights retained

Question 42

What is done pro-rata

Answer 42

Interest Depreciation

Question 43

Elements of lease

Answer 43

Right to control Identified asset Period of use

Question 44

Right of control in a lease characteristics?

Answer 44

Obtain substantially all economic benefits from an asset

Question 45

Identified asset in a lease characteristics?

Answer 45

A similar asset cannot be used as a substitiute for the original asset

Question 46

Period of use characteristics?

Answer 46

Lease may only be for a portion of contract's term

Question 47

Right-of-use asset initial measurement?

Answer 47

Initial measurement + Payments made before or at commencement date - incentives received + Initial direct costs + PV costs of dismantling, removing and restoring site

Question 48

Control in right-of-use asset?

Answer 48

Substantially all economic benefits from identified asset use

Question 49

What represents short-term leases?

Answer 49

Leases under 12 months

Question 50

Equation if transaction is sale (rights retained) (sale and leaseback)

Answer 50

Carrying amount * (Present value of future lease payments/FV) = Gain relating to rights retained

Question 51

Calculation of total gain (sale and leaseback)

Answer 51

Fair value (=proceeds) - carrying amount

Question 52

Equation if transaction is sale (rights transferred) (sale and leaseback)

Answer 52

Total gain - rights retained

Question 53

Adjustment required to account for gain on sale in profit or loss?

Answer 53

Rights retained

Question 54

Amount of gain that can be recognised in profit or loss?

Answer 54

Rights transferred

Question 55

DEPRECIATION CHARGED TO?

Answer 55

STATEMENT OF PROFIT AND FUCKING LOSS

Question 56

Why do we add an extra year for a lease liability?

Answer 56

To calculate the current liability for the lease payment

Question 57

PVFLP

Answer 57

Present Value of Future Lease Payments

Question 58

Payment in advance treatment for a lease liability?

Answer 58

Included after (lease PV + finance cost) is determined. Is not included in carrying amount at

Question 59

Rights of use retained initial measurement?

Answer 59

Carrying amount * (PV/FV)

Question 60

Gain transferred to buyer initial measurement?

Answer 60

Total gain - gain relating to right-of-use retained FV - CV - (FV - CV * (PV/FV). This is a gain on disposal