This appears to create a finance lease balance
a) The lease term is for the major part of the assets remaining economic life
b) The present value of the minimum lease payments is substantially equal to the fair value (4.35m + (4,35m × 2,49) = 15.182 million compared to the value of 15.2 million
c) The lease contains a bargain pure lease option
d) Lessee has option to purchase the asset at the end of the lease term
Under IAS 17, where a sale and lease back transaction results in a finance lease, any excess of the sale proceeds over the carrying amounts should be deferred and recognized over the lease term. Therefore the excess proceeds sh. 5.2 million (15.5m – 10m) will be amortized over four years at sh. 1.3 million per annum. The asset and the lease obligation are recorded at the sale value of sh. 15.2 million
Wilfykil answered the question on February 8, 2019 at 08:36
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Date posted: February 8, 2019. Answers (1)
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Date posted: February 8, 2019. Answers (1)
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Date posted: February 8, 2019. Answers (1)
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Date posted: February 8, 2019. Answers (1)
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