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Lease Residual Option Exercise Accounting Entries

Received Response
edited Dec 5, 2023 5:44AM in Lease Accounting 3 comments

Summary: Lease Residual Option Exercise Accounting Entries.

We are using a lease residual option with a negative amount for the proceeds of sale of assets, but when we exercise it. It increases the cost & accumulated amortization. Can you explain option exercise accounting entries as part of IFRS 16 ?

Please refer to the below example.

Lease Term = 1-Jan 23 to 30-Sep-23

Asset Term = 1-Jan 23 to 30-Sep-23

Amortization Date - 1-Jan-23

Proration Method = Days/Month

Discount Rate = 2.6

Payment Amount = 1000 USD per month

Option Amount = - 3000 USD (On Last Day of Lease)

Before Exercise Option

ROU = 5980.85

Accumulated Amortisation = -5980.85

After Exercising Option On 30th Sep 23


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