Tutorial 3

IFRS 16 Leases

Question 1

5000 5000 5000 5000 5000

1 2 3 4 5

1/8/2018 1/8/2019 1/8/2020 1/8/2021 1/8/2022 31/7/2023

Useful life = 6 yrs

Initial direct costs = RM 1000
Reimburse = RM 400
r = 4.5%

On commencement date, 1/4/17, recognize right-of-use (ROU) asset and lease liability

i. Lease liability = PV of all lease payments unpaid as at the commencement date

= (5000 ÷ 1.045) + (5000 ÷ 1.045̂2) + (5000 ÷ 1.0453) + (5000 ÷ 1.0454)

= 17938

Dr ROU asset 17938

Cr Lease liability 17938

ii. Initial direct costs RM 1000 – RM 400 = RM 600

Dr ROU asset 600

Cr Bank 600

Summary

Dr ROU asset 18538

Cr Lease liability 13745

Cr Bank 600
b) Finance cost allocation table

Y/e 30/9 Opening Lease o/s at Finance Closing

liability payment beginning of charge @ liability
4.5%
2019 17938 - 17938 807 18745
2020 18745 (5000) 13745 619 14364
2021 14364 (5000) 9364 421 9785
2022 9785 (5000) 4785 215 5000
2023 5000 (5000) - - -

c) Depreciation = 18538 ÷ 5 =3707

Statement of profit or loss for the year ended 31/7

2019 2020 2021 2022 2023

RM RM RM RM RM Balancing
Depreciation (3707) (3707) (3707) (3707) (3710) figure
Finance charges 807 619 421 215 0

Statement of financial position as at 31/7

2019 2020 2021 2022 2023

RM RM RM RM RM
NCA
Right-of-use asset 18538 18538 18538 18538 18538
Less: Accm Depn (3707) (7417) (11121) (14828) (18538)
14831 11121 7417 3710 0

CL
Lease Liability 5000 5000 5000 5000 0

NCL
Lease Liability 13745 9364 4785 0 0
 Question 2

9000 24000 24000 30391

1 2 3 4

1/4/2017 31/3/2018 31/3/2019 31/3/2020

Useful life = 5 yrs

r = 25%

On commencement date, 1/4/17, recognize right-of-use (ROU) asset and lease liability

i. Lease liability = PV of all lease payments unpaid as at the commencement date

= (24000 ÷ 1.025) + (24000 ÷ 1.025̂2) + (30391 ÷ 1.0253)

= 62781

Dr ROU asset 62781

Cr Lease liability 62781

b) Finance cost allocation table

Y/e 30/9 Opening Finance o/s at Lease Closing

liability charge @ 25% beginning of payment liability
2018 62781 15695 78476 (24000) 54476
2019 54476 13619 68095 (24000) 44095
2020 44095 11024 55119 (30391) 24728

c) Depreciation = 62781 ÷ 3 = 20927

Statement of profit or loss for the year ended 31/3

2018 2019 2020

RM RM RM
Depreciation (20927) (20927) (20927)
Finance charges 15695 13619 11024
Statement of financial position as at 31/3

2018 2019 2020

RM RM RM
NCA
Right-of-use asset 62781 62781 62781
Less: Accm Depn (20927) (41854) (62781)
41854 20927 0

CL
Lease Liability 10381 12976 0

NCL
Lease Liability 44095 31119 0

Question 3

Based on IFRS 16, lease payment are recognize as an expense on a straight line basis over the lease
term.

An expense of RM 1250 could be recognised in the Statement of Profit or Loss for year 2 and 3,
however year 4 and 5 recognised as an expense of RM 1000.

Year 2 and 3 = RM 1750 – RM 500 = RM 1250

Year 4 and 5 = RM 1500 – RM 500 = RM 1000