LEASING ACCOUNTING ACCORDING TO INTERNATIONAL REGULATIONS

Sxomple  5:

S.A.  Sharp  applies  the  provisions  of  IFRS  and  has  leased  a  film  studio  since 01.01.202N, for a period of 4 years. The leasing contract provides for early termination, at the same time S.A. Sharp has the option to extend the leasing contract for a period of 3 years. On 01.01.202N, the lessee did not consider that option.

At the beginning of each year, the lessee has the obligation to pay the leasing annuity in the amount of 200,000 MDL. At the end of year 3, S.A. Sharp evolved and decided to use the option of extending the leasing contract for 3 years (the total duration of the contract will be 7 years). For the next 3 years, the leasing payments amount to 225,000 MDL/year. The marginal lending rate applied for the entire period: 4%.

Determine:

What will be the accounting formula and the amount reflected on 01.01.202N+4 for the new contract

31.12.202N+4:

• Recognition in the accounting of the leasing right, updated according to the interest rate used: 624 395 MDL (225 000 * 2,775091).

Dt Right to use the asset under the leasing contract

Ct Preliminary lease debt

• Present value of leasing debt:
  • 200 000 MDL – without extension of the leasing contract
  • 824 395 MDL – with the extension of the leasing contract