Simple case IFRS 16 Leases – Fixed payments depending on an index and rent free period – Last part

The first part of calculations and background information for the simple case IFRS 16 Leases is dicsussed on the web page listed here.

Simple case IFRS 16 Leases – Fixed payments depending on an index and rent free period

We will not repeat every quarterly payment/journal entry. However the quarterly payment as at 1 December 2015, the year-end financial closing entries and the indexing as at 1 March 2016 will be discussed here.

Qtr payment 1 December 2015:

There is a cash payment of € 49,997.50, the lease liability as at 1 December 2015 is € 2,088,526.07, therefore the interest portion of € 49,997,50 is € 8,354 (2,088,526,07 * 0,40%). The redemption of the lease liability is therefore € 41,643.50.

Year end financial close 31 December 2015:

Depreciation of the right-to-use asset has to be recorded over the period 1 March – 31 Deecmber 2015, is 10 months. The total lease period is 144 months.

Depreciation 2015: € 2,154,990.20 * 10 / 144 = € 149,652.10, to be recorded as depreciation expenditure.

Interest has been paid on 1 December 2015 for an amount of € 8,354, of which two months are prepaid. € 8,354 * 2 / 3 = € 5,569 to be recorded as prepaid lease interest.

Indexing of the lease terms 1 March 2016:

The cost-of-living index is the index from February 2015 to February 2016 and was reported to be 1.63% (rounded). The lease terms increase from € 49,997,50 * 1.62553276% = € 50,810.23. The new lease table changes and is listed below.

The net present value of the right-to-use asset has to become € 2,028,936,07 as at 1 March 2016. It was under the old lease term € 1,989,523.86. This is an increase of € 49,412.21 for the right-to-use asset and the related lease liability. The QTR interest has also increased from € 7,958 to € 8,116. See also the adjusted lease table below:

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