Leases - sale and leaseback Example (at fair value) - ACCA Financial Reporting (FR)

[@ankitwadhawan9771]

Sir, you are incredible. How simple you have made it for understanding. Truly amazing!

[@shekujalloh551]

You deserve a pay rise Chris‼️❤

[@positivevibes5079]

Very nice explanation... excellent lecture

[@Jertzukka]

Anyone wondering where the $364,522 came from, it was (10,000,000-7,721,735)-(8,400,000-6,486,257)

[@opentuition]

Best to ask in the Ask the Tutor Forum on our website (because the tutor is not always able to see questions on here :-) )

[@natanlempert]

10,000,000 -8,400,000 - 7,721,735+6,486,257 = 364, 522 gain

[@abdul-rafeeqabubakar5713]

Thankyou.

[@سامحسيد-ص8ج]

@@opentuition where this forum

[@opentuition]

​@@سامحسيد-ص8ج Linked on our website: opentuition.com

[@MonirulIslam-kk9eq]

what a lecture !!! superv

[@stefgo2814]

How was the annuity factor calculated?

[@narmeenmoyeed7705]

How did you get the gain amount??

[@tasneem6427]

perfect!!

[@nadsuza]

thanks!

[@ado22222]

Hi, how was that implicit rate of interest of 5% arrived at?

[@missconnieabiaw1921]

nice delivery sir.. please how did you get the amount for the gain? thank you.

[@abdul-rafeeqabubakar5713]

@蜡笔小新 please whats the debit/credit figures?

[@haseebahmad7428]

@@abdul-rafeeqabubakar5713 12:58 Subtract the retained figure in CV column (in second red circle) from the proceeds figure (in first red circle) you would get 1.915 M Now Subtract the CV transferred from FV transferred (2.77 - 1.914) 0.364 M Thats the gain you have made and will be shown in SPL.

[@Gagz]

Is it not double dipping into profits if we depreciate the right of use asset and also charge the lease liability expense from P&L account along with the implicit interest. Please shed some light on this.

[@opentuition]

If you want an answer from our tutor then you must ask in the free Ask the Tutor Forum on. our free website. Our tutors do not monitor posts here but they always answer questions posted in our Ask the Tutor Forums.

[@Coriolanus359]

Tutor: can’t see the examiner being too evil here The examiner: 😏

[@nithishkumar.k296]

How did 7.722 came

[@سامحسيد-ص8ج]

In 4.12 seconds Liabilty @ amortized cost How this account adjusted or closed

[@shaista9938]

Thanks alot for this lecture. Excellent. However, I didn't understand" the no sale " accounting entry. Why dont you cr. Liability at NPV ,instead of ammortizing.

[@angelinc3]

Hello. Let me try to answer your question. The crediting of liability @ 10m is already at present value whereby you get the 10m one shot from the lessor. So first you recognise the 10m as your liability. Then slowly you amortise it by recognising your yearly payment (this is to ensure that you recognise your exp in a systematic way, not one shot). To do this, you will need to see whether you make yearly payment at the beginning/end of year. If you payback at beginning of the year, then (liability - payment) + interest = bal of liability to recognise at year end. And you will need to recognise the interest exp too. If payment is made at year end, then (liability + interest) - payment = bal of liability to recognise at year end. In this example, payment is at year end. So (10m x 1.05) - 1m = 9.5m bal of liability to recognise in your SOFP and interest exp of 0.5m to be recognise in your SOPL.

[@MikelMoravec]

@@angelinc3 Yes but after 10 years when the leasing is done; there remains balance on the liability (accumulated interest rate). Please can you explain why or how do i derecognise the reamining balance?

[@rksu8867]

The sum of debits is higher than the sum of credits so how is it a gain ?

[@chase78966]

Revenue is credited

[@aaronduncan7708]

Every year our lecturer includes a lease question in the FR2 exam

[@lebojoseph1087]

A month away from June exams and I don't understand what an annuity factor is 🤧🤧 can someone kindly explain how we calculate it

[@bhavyaarjunkumar4052]

First get the rate implicit in the lease or the incremented borrowing rate which is usually given in the question. During the exam you will be provided with the annuity factor table which you can use because the AF is directly given under the rate and against the year. You can multiply the amount by that value directly. Alternatively if you want to calculate it (1-1/((1+r)^n))/r where r is the rate and n is the number of years

[@bhavyaarjunkumar4052]

An annuity factor is a sum of all discount factors ie. a sum of discount factors for a particular rate over a number of years. Basically used for the same reason as a discount factor that is to find the present value of the many payments or cashflows happening in future. Unlike the discount factor where you are calculating only for a certain year annuity factor calculates upto that particular year. Hope that makes sense

[@leonardordel92]

did you pass

[@merissawhite-bailey7258]

Can you please state what figures were used to calculate gain/loss?

[@z.jz.j7254]

All debit and credit will balancing so they will be your gain or loss

[@shaista9938]

How did you calculate the 77.22% for Right of Use asset

[@bhavyaarjunkumar4052]

The retained portion over the total proceeds.

[@billylonergan3911]

where did 7.722 come from?

[@jplrahimyarkhan1043]

(PV OF ASSEST/PROCEEDS (SALE VALUE)*100) (7721735/10,000,000)*100

[@haseebahmad7428]

@@jplrahimyarkhan1043 hello , Where are you from ryk I'm from there too ?

[@MM-ru6we]

The SBR Lecture on same was also helpful - kzbin.info/www/bejne/ZqGXlYR-ma2amdE

[@abi71200]

How was the 7.722 calculated?

[@princecarter3838]

Lease liability (7721735) / Proceeds (10M) * 100 = 77.22%

[@shaista9938]

Your red circles obscures too much the words. Please underline instead of obscuring.

[@opentuition]

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