On 1 January 2014, Lystra entered into a lease agreement with Trina to rent an asset for a 6 year period, at which point, it will be returned to the lessor and scrapped. The annual payments of $18,420, made in advance. The initial measurement of the lease liability amounts to $84,000, discounted at the implicit interest rate shown in the lease agreement of 12.5%. Lystra has the right to determine the use of the asset during the lease term and will obtain substantially all the economic benefit from its use. Required 1 .Explain how the above lease would be accounted for the year ending 31 December 2014 in both the books of the lessee and lessor including producing relevant extracts from the statement of profit or loss and statement of financial position and the relevant portion of the amortisation schedule 1a State the criteria for a contract to be classified as a lease 2. What is the lessee required to recognize in the financial statement at the inception of a lease? Right of use and associated liability. 3. According to IFRS 16, How should the right of use and lease liability be measured initially? And what discount rate should be used for the present value of the minimum lease payments? 4. How should the right of use of a leased asset be depreciated – lower of the lease term and the economic life of the asset?
On 1 January 2014, Lystra entered into a lease agreement with Trina to rent an asset for a 6 year period, at which point, it will be returned to the lessor and scrapped. The annual payments of $18,420, made in advance. The initial measurement of the lease liability amounts to $84,000, discounted at the implicit interest rate shown in the lease agreement of 12.5%. Lystra has the right to determine the use of the asset during the lease term and will obtain substantially all the economic benefit from its use.
Required
1 .Explain how the above lease would be accounted for the year ending 31 December 2014 in both the books of the lessee and lessor including producing relevant extracts from the statement of profit or loss and
1a State the criteria for a contract to be classified as a lease
2. What is the lessee required to recognize in the financial statement at the inception of a lease? Right of use and associated liability.
3. According to IFRS 16, How should the right of use and lease liability be measured initially? And what discount rate should be used for the present value of the minimum lease payments?
4. How should the right of use of a leased asset be
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