Hi All,
Scenario:
Recently our company has leased a truck. The contract has following breakdown:-'
Term: 60 months
Lease instalment advance= 980/month (pre-tax) (Month 1 of 60)
Down payment= 4020
Dealership Rebate= 1000
Modifications to truck before delivery= 6300
To start as per examples given on this forum, I have calculated PV of all payments to determine the liability. Since advance instalment has been paid, I have calculated PV for 59 months. Let’s say PV liability is 90,000
Queries/Confusions:-
1. Now, when I determine the ROU Asset Value, Am I correct to adjust the components, i.e.
90,000 + 4020 (Down payment) + 980 (Advance Lease instalment) – 1000 (Rebate) + 6300 (Modifications) ?
2. Secondly, what’s confusing me a lot is that the 980/month lease instalment already is adjusted for all components. So if I add the components to determine ROU Asset value, am I not double counting it in asset value? I mean shouldn’t the ROU Asset Value be just = 90,000 which is same as PV of lease payments (liability)?
Do guide me so I clear the concept in detail.
Thanks,
Sameer.
IFRS 16 - Vehicle Lease
Re: IFRS 16 - Vehicle Lease
obviously you should not double count the payments in RoU value, RoU = lease liability (payments to be made in the future) + lease payments made at or before the commencement of the lease
I don't know which payments are included in PV of 90,000
the modification can be treated as upfront payment to the lessor and added to RoU
I don't know which payments are included in PV of 90,000
the modification can be treated as upfront payment to the lessor and added to RoU