Page 418 - SBR Integrated Workbook STUDENT S18-J19
P. 418
Chapter 25
Example 3
Lessee accounting – subsequent treatment
Interest will be charged on the lease liability, which will increase its carrying
amount and also be charged to profit or loss. Cash payments will reduce the
liability.
1 Jan X1 Interest (10%) Cash payment 31 Dec X1
$m $m $m $m
3.04 0.30 (1.0) 2.34
The interest charged in profit or loss will be $0.3 million. The liability will have
a carrying amount at the reporting date of $2.34 million.
The right-of-use asset will be depreciated over the shorter of the lease term (4
years) and its useful economic life (10 years). The depreciation charge in the
year will therefore be $0.79 million ($3.14m/4 years) and the right-of-use asset
will have a carrying amount of $2.35 million ($3.14m – $0.79m) at the
reporting date.
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