- 5 Marks
FR – Nov 2023 – L2 – Q2b – Financial Reporting Standards and Their Applications
Explain the financial reporting treatment of a lease transaction for Fugu Ltd in accordance with IFRS 16.
Question
Fugu Ltd (Fugu) operates in the automobile industry. The following transaction relates to Fugu for the year-end 31 July 2023: On August 1, 2022, Fugu entered into a ten-year lease, agreeing to pay GH¢3 million annually in arrears in exchange for the use of a building. The present value of the minimum lease payments was GH¢20.13 million at 1 August 2022, and the useful economic life of the building was 50 years. Fugu’s cost of capital is 8%.
Required:
In accordance with IFRS 16: Leases, show the financial reporting treatment of the above transactions in the financial statements of Fugu for the year ended 31 July 2023.
Find Related Questions by Tags, levels, etc.
- Topic: Financial Reporting Standards and Their Applications, Leases
- Series: NOV 2023
