IFRS 16 Leases

**Section A** LogisFast, a logistics company, sold its main distribution hub to a finance house for $10 million (which is its fair value) and immediately leased it back for 15 years. The carrying amount of the hub prior to the transaction was $6 million. The transaction satisfies the requirements of IFRS 15 to be accounted for as a sale. The present value of the lease payments is $8 million. What amount of profit on the sale should LogisFast recognize immediately in profit or loss?

**Section B - Case 1** *AeroStream is a commercial airline. On 1 January 20X5, AeroStream entered into a contract with a corporate client to provide 10 specific charter flights during the year for a total fixed price of $50,000. As part of the contract, AeroStream also granted the client 50,000 loyalty points, which can be redeemed for future flights. The standalone selling price of one charter flight is $5,500. The standalone selling price of one loyalty point is estimated at $0.10. Also on 1 January 20X5, AeroStream leased a new aircraft for 5 years. The lease requires annual payments of $200,000 in arrears. The implicit interest rate in the lease is 5%. The present value of the lease payments is $865,895. AeroStream incurred initial direct costs of $15,000 to negotiate the lease.* **Question:** What is the initial carrying amount of the Right-of-Use (ROU) asset recognized by AeroStream on 1 January 20X5?

**Section B - Case 1** *AeroStream is a commercial airline. On 1 January 20X5, AeroStream entered into a contract with a corporate client to provide 10 specific charter flights during the year for a total fixed price of $50,000. As part of the contract, AeroStream also granted the client 50,000 loyalty points, which can be redeemed for future flights. The standalone selling price of one charter flight is $5,500. The standalone selling price of one loyalty point is estimated at $0.10. Also on 1 January 20X5, AeroStream leased a new aircraft for 5 years. The lease requires annual payments of $200,000 in arrears. The implicit interest rate in the lease is 5%. The present value of the lease payments is $865,895. AeroStream incurred initial direct costs of $15,000 to negotiate the lease.* **Question:** What is the carrying amount of the lease liability in AeroStream's Statement of Financial Position as at 31 December 20X5 (after the first payment is made)?

**Section B - Case 1** *AeroStream is a commercial airline. On 1 January 20X5, AeroStream entered into a contract with a corporate client to provide 10 specific charter flights during the year for a total fixed price of $50,000. As part of the contract, AeroStream also granted the client 50,000 loyalty points, which can be redeemed for future flights. The standalone selling price of one charter flight is $5,500. The standalone selling price of one loyalty point is estimated at $0.10. Also on 1 January 20X5, AeroStream leased a new aircraft for 5 years. The lease requires annual payments of $200,000 in arrears. The implicit interest rate in the lease is 5%. The present value of the lease payments is $865,895. AeroStream incurred initial direct costs of $15,000 to negotiate the lease.* **Question:** Assuming AeroStream depreciates the aircraft on a straight-line basis, what is the total charge to the Statement of Profit or Loss for the year ended 31 December 20X5 in respect of the lease?