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      Calculations on Lease Agreement
      • 26 Jan 2024
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      Calculations on Lease Agreement

      • Updated on 26 Jan 2024
      • 1 Minute to read
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      Article summary

      Lease Term (months) [IFRS16:18]

      logically, there should be only one of the options - either to extend or to terminate.

      image.png

      Depreciation Term (months) [IFRS16:32]
      image.png

      Payments per Year
      Payment Frequency:

      • Weekly: Payments per Year = 52
      • Fortnightly: Payments per Year = 26
      • Monthly: Payments per Year = 12
      • Quarterly: Payments per Year = 4
      • Semi-Annual: Payments per Year = 2
      • Annual: Payments per Year = 1

      Number of Payments
      Number of Payments = Lease Term (months) [IFRS16:18] / 12 * Payments per Year

      Lease Payment Amount [IFRS16:27a]

      image.png

      PV of Amounts Due at Lease Term

      image.png

      PV of Amounts Due at Lease Term = PV (Discount Rate, Number of Payments, Amount Due at Lease Term)

      Present Value of Lease Payments = PV (Discount Rate, Number of Payments, Lease Payments)

      PV calculation

      In system, Excel equivalent XNPV is being used
      image.png

      where:

      • di = the ith, or last, payment date.
      • d1 = the 0th payment date.
      • Pi = the ith, or last, payment.

      System uses 360/30 convention. Calculating that there are 360 days in a year and every month gets 30 as payments monthly are equal.

      :::
      Lease Liability at Commencement Date
      image.png

      Right-of-Use Asset at Commencement Date
      image.png

      Calculation exceptions for TRANSITION leases

      Right-of-Use Asset at Transition Date = Lease Liability at Transition Date

      Calculation exceptions for Migration lease

      Lease Liability at Migration Date - field entered in Migration tab. In first month remeasurement done to get system favourable amounts.
      Right-of-Use at Migration Date - calculated from Historical asset cost - Accum. Depreciation at Migration

      • At Migration Lease Liability and RoU has to be the same. Difference between them is posted in equity or some balancing account.
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