ACCA Strategic Professional · Strategic Business Reporting (International) · Leases
Kaldor Co leases a machine for 3 years from 1 January 20X1, paying $20,000 annually in arrears. The incremental borrowing rate is 10% (3-year annuity factor 2.487). Kaldor pays $1,000 of initial direct costs and received no lease incentives. What is the initial carrying amount of the right-of-use asset?
The right-of-use asset is $50,740. The lease liability is $20,000 x 2.487 = $49,740, and IFRS 16 adds the initial direct costs of $1,000 to the liability, with no adjustment for incentives or prepaid payments here.
- A$49,740
- B$50,740Correct
- C$60,000
- D$48,740
Explanation
Lease liability = 20,000 x 2.487 = $49,740. The right-of-use asset equals the liability plus initial direct costs of $1,000 = $50,740. Option $49,740 omits the direct costs; $60,000 is the undiscounted payments.
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