Leases

SECTION A On 1 July 20X6, LogisticsPro Co entered into a sale and leaseback transaction for a fleet of delivery trucks. The trucks had a carrying amount of $2,000,000. They were sold to a finance company for their fair value of $3,000,000 and immediately leased back for 5 years. The transaction satisfies the requirements of IFRS 15 to be accounted for as a sale. The present value of the lease payments is $1,800,000. What is the gain on rights transferred to the buyer-lessor to be recognized in profit or loss?

**Section A** TransLogistics entered into a 4-year lease for a fleet of delivery trucks on 1 January 20X5. The lease requires annual payments of $40,000 in arrears. The interest rate implicit in the lease is 6%. The present value of an ordinary annuity of $1 for 4 years at 6% is 3.465. What is the non-current lease liability to be reported on the Statement of Financial Position as at 31 December 20X5?

**Section B - Case 1: NovaGrid (Question 3 of 5)** *Scenario:* NovaGrid, a telecom infrastructure company, entered into a contract on 1 January 20X5 to build a specialized network for a client and maintain it for 2 years. The total contract price is $1,200,000. If sold separately, the network build would cost $1,000,000 and the 2-year maintenance would cost $400,000. The network was completed and handed over on 31 December 20X5. Additionally, NovaGrid leased a specialized crane on 1 January 20X5 for 3 years. Payments are $50,000 annually in arrears. The implicit interest rate is 5%. (PV of $1 annuity for 3 yrs at 5% = 2.723). *Question:* What is the initial value of the Right-of-Use (ROU) asset recognized for the crane on 1 January 20X5? (Assume no initial direct costs or advance payments).

**Section B - Case 1: NovaGrid (Question 4 of 5)** *Scenario:* NovaGrid, a telecom infrastructure company, entered into a contract on 1 January 20X5 to build a specialized network for a client and maintain it for 2 years. The total contract price is $1,200,000. If sold separately, the network build would cost $1,000,000 and the 2-year maintenance would cost $400,000. The network was completed and handed over on 31 December 20X5. Additionally, NovaGrid leased a specialized crane on 1 January 20X5 for 3 years. Payments are $50,000 annually in arrears. The implicit interest rate is 5%. (PV of $1 annuity for 3 yrs at 5% = 2.723). *Question:* What is the depreciation charge for the Right-of-Use asset for the year ended 31 December 20X5?

**Section B - Case 1: NovaGrid (Question 5 of 5)** *Scenario:* NovaGrid, a telecom infrastructure company, entered into a contract on 1 January 20X5 to build a specialized network for a client and maintain it for 2 years. The total contract price is $1,200,000. If sold separately, the network build would cost $1,000,000 and the 2-year maintenance would cost $400,000. The network was completed and handed over on 31 December 20X5. Additionally, NovaGrid leased a specialized crane on 1 January 20X5 for 3 years. Payments are $50,000 annually in arrears. The implicit interest rate is 5%. (PV of $1 annuity for 3 yrs at 5% = 2.723). *Question:* What is the total charge to the Statement of Profit or Loss in respect of the crane lease for the year ended 31 December 20X5?

**Section A** AeroFreight sold a cargo aircraft to a leasing company for its fair value of $40 million. The carrying amount prior to the sale was $30 million. AeroFreight immediately leased the aircraft back for 5 years. The present value of the lease payments is $24 million. The transfer qualifies as a sale under IFRS 15. What is the gain on rights transferred to the buyer-lessor to be recognized in AeroFreight's profit or loss?

**Section B - Case 1: Nimbus Renewables** *Scenario:* On 1 January 20X4, Nimbus Renewables began constructing an offshore wind farm. The following costs were incurred: - Materials and components: $10,000,000 - Direct labor: $5,000,000 - Testing the turbines (net of $200,000 from selling power generated during testing): $800,000 - General administrative overheads: $1,200,000 By law, Nimbus must decommission the wind farm at the end of its 20-year useful life. The estimated future cost of decommissioning is $4,000,000. Nimbus uses a discount rate of 5%. The present value of $1 payable in 20 years at 5% is 0.377. Nimbus also leased specialized maintenance vessels on 1 January 20X4 for 5 years. The annual lease payment is $2,000,000 payable in arrears on 31 December. The interest rate implicit in the lease is 6%. The present value of an ordinary annuity of $1 for 5 years at 6% is 4.212. *Question:* What is the initial measurement of the lease liability for the maintenance vessels on 1 January 20X4?

**Section B - Case 1: Nimbus Renewables** *Scenario:* On 1 January 20X4, Nimbus Renewables began constructing an offshore wind farm. The following costs were incurred: - Materials and components: $10,000,000 - Direct labor: $5,000,000 - Testing the turbines (net of $200,000 from selling power generated during testing): $800,000 - General administrative overheads: $1,200,000 By law, Nimbus must decommission the wind farm at the end of its 20-year useful life. The estimated future cost of decommissioning is $4,000,000. Nimbus uses a discount rate of 5%. The present value of $1 payable in 20 years at 5% is 0.377. Nimbus also leased specialized maintenance vessels on 1 January 20X4 for 5 years. The annual lease payment is $2,000,000 payable in arrears on 31 December. The interest rate implicit in the lease is 6%. The present value of an ordinary annuity of $1 for 5 years at 6% is 4.212. *Question:* What is the carrying amount of the Right-of-Use (ROU) asset for the vessels at 31 December 20X4?