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On 1 January 2019, Canwick Ltd (which prepares accounts to 31 December) enters into a four-year lease of office machinery. The company is required to make four lease payments of £45,000 and these fall

On 1 January 2019, Canwick Ltd (which prepares accounts to 31 December) enters into a four-year lease of office machinery. The company is required to make four lease payments of £45,000 and these fall due on 1 January 2019, 2020 2021 and 2022. The rate of interest implicit in the lease is 9% per annum. Required: (a) Define the term "right-of-use asset". Explain how a right-of-use asset and a lease liability are measured at the commencement of a lease (6 marks) (b) Explain how this lease should be accounted for by Canwick Ltd in accordance with the requirements of IFRS16 Leases.

Apr 18 2021 View more View Less

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