IFRS 16 - Vehicle Lease

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sameer.mobin89
Posts: 1
Joined: 04 Jan 2021, 21:02

IFRS 16 - Vehicle Lease

Post by sameer.mobin89 »

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.
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Marek Muc
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Joined: 15 Oct 2018, 17:21
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Re: IFRS 16 - Vehicle Lease

Post by Marek Muc »

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
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