Cor
por
ateRepor
ti
ng
Assi
gnment#3
Submitt
edBy:
Fati
maSabir
Mi
shalTaherQayyum
MuhammadUsmanNawaz
Zai
nabAf
tab
Submi
tt
edt
o,
Ms.Fi
zzaKhan
t
h
Dat
ed:27 Apr
il2021
, I
FRS–16L
eas
es
Al
eas
egi
vesa
nen
tit
yth
ewr
it
etoc
ont
roloru
sea
nas
setf
orac
ert
ainp
eri
odi
nex
cha
ngef
ors
ome
c
ons
ide
rat
iona
ndf
all
sun
dert
hes
cop
eofI
FRS1
6–L
eas
es.Th
erei
saL
ess
or(
whol
eas
esa
nas
set
),
al
ess
ee(
towh
oma
sse
tisb
ein
gle
ase
d),a
nas
set
,an
dsomec
ons
ide
rat
ioni
nvol
vedi
nth
econ
tra
ct.
Th
eas
setmu
stb
ese
par
ate
lyi
den
tif
iab
lea
sse
tan
dth
ele
sse
emu
sth
aver
igh
ttou
sea
ndob
tai
n
e
con
omi
cbe
nef
it
sfr
omt
hea
sse
t.
L
EASEACCOUNTINGINTHEBOOKSOFL E
SSE E
F
romtheless
ee’
spointofvi
ew,thel
easepaymentcanei
therbeinar
rea
rs,
inadva
nce,orofshor
t
l
i
fe&lowv al
ueit
ems–s pec
ifi
edinI
FRS1 6a sexe
mp t
ions,andhe
ncesubse
quent
lyme asu
red
a
ccord
ingl
y.Howeve
r,befor
ethesethr
eec oncep
tsaredis
c us
sed,t
heini
ti
almeasu
reme n
tofa
l
eas
eliab
il
it
ymustbeestabl
i
shed.
Aleaseli
abil
i
tyisanobl
ig
ationforacompanyth
a tmustbep
aid.Si
nce
,thi
spay
me n
tistobein
somefutur
etime,i
tisn
ecessaryfort
heamounttobedisc
ount
edb a
cktoit
spr
esen
tvaluei
nthe
book
soft heles
see
.Accordi
ngtoIFRS16,t
hepresentv
alu
eoftheamountt
obepai
dc a
nincl
ude
t
h ef
oll
owingit
ems:
An
yfi
xedp a
yme n
ts
Anyvari
abl
ep ay
me nt
satthes
tar
toft
hele
ase
Re
s i
dualval
ueguarant
ees
Areasonab
lycert
ainopt
ion
stopur
chas
etheas
seta
tth
een
doft
hel
eas
e
p
eri
odTe
rmi
nat
ionp
ena
lti
es
I
nre
tur
nfort
hisl
i
abi
l
it
y,t
hec
omp
anya
cqu
ire
saRi
ghtofUs
eAs
set
,th
ati
sequ
alt
oth
ele
asel
i
abi
l
it
y
a
mou
nt,
plu
san
yle
asep
ayme
ntsma
ded
uri
ngorb
efor
eth
est
artoft
hel
eas
e,a
nyi
ni
ti
ald
ire
ctc
ost
s(e
.g.
,
c
ommi
ssi
onst
oag
ent
s,e
tc.
),a
nddi
sma
ntl
i
ngc
ost
soft
heu
nde
rly
inga
sse
t.Th
us,t
hed
oub
lee
ntr
ytob
e
p
ass
edf
ori
ni
ti
alme
asu
reme
nti
nth
ebook
sofl
ess
eei
sasf
oll
ows
:
$ $
Ri
ghtofUseAsset x
xx
LeaseLi
abi
li
ty x
xx
Bank(i
fdir
ectcos
tsi
ncu
rre
d) x
xx
I
tisa
lsoimp orta
nttoe st
abl
isht h
el eas
ete r
m, asith e
lpsitthepresentval
uecalcul
ati
onaswe ll
a
swh i
ledetermini
ngthed epreci
ationchar
g efortherightofusea ss
et.Theleaseter
mc ane i
the
r
b
e:
Non-can ce
ll
ableperi
od :whichme a
n sthatth
el esseecannotte
rminat
etheleasecontra
ct
overthi
ss peci
fi
edp er
iod.Itbasi
cal
lyincludesthepredet
ermined,i
nit
ial
yearsoverwhich
th
el easespreads.
Ext
e ndedPe r
iodsonlyifreasonabl
yc ert
aintob eexer
cised:thele
sseegive
ntheop t
ionto
ext
e n
dt heleaseperi
oda ndc andoitifth
e yarereason
ab l
ycertai
nthatt
heywillex
erci
se
th
eop tion.
Pe
rio
dal
lowe
dtot
ermi
nat
e,o
nlyi
fre
aso
nab
lyc
ert
ainn
ott
obee
xer
cis
ed:i
fth
ele
sse
eis
r
eas
ona
blyc
ert
aint
hatt
heywi
l
lnotb
eex
erc
isi
ngt
heop
tiont
oex
ten
dth
ele
ase
,th
ent
heya
re
a
ll
owe
dtot
ermi
nat
eth
econ
tra
ctb
efor
eth
epr
opos
ede
xte
nsi
on.
por
ateRepor
ti
ng
Assi
gnment#3
Submitt
edBy:
Fati
maSabir
Mi
shalTaherQayyum
MuhammadUsmanNawaz
Zai
nabAf
tab
Submi
tt
edt
o,
Ms.Fi
zzaKhan
t
h
Dat
ed:27 Apr
il2021
, I
FRS–16L
eas
es
Al
eas
egi
vesa
nen
tit
yth
ewr
it
etoc
ont
roloru
sea
nas
setf
orac
ert
ainp
eri
odi
nex
cha
ngef
ors
ome
c
ons
ide
rat
iona
ndf
all
sun
dert
hes
cop
eofI
FRS1
6–L
eas
es.Th
erei
saL
ess
or(
whol
eas
esa
nas
set
),
al
ess
ee(
towh
oma
sse
tisb
ein
gle
ase
d),a
nas
set
,an
dsomec
ons
ide
rat
ioni
nvol
vedi
nth
econ
tra
ct.
Th
eas
setmu
stb
ese
par
ate
lyi
den
tif
iab
lea
sse
tan
dth
ele
sse
emu
sth
aver
igh
ttou
sea
ndob
tai
n
e
con
omi
cbe
nef
it
sfr
omt
hea
sse
t.
L
EASEACCOUNTINGINTHEBOOKSOFL E
SSE E
F
romtheless
ee’
spointofvi
ew,thel
easepaymentcanei
therbeinar
rea
rs,
inadva
nce,orofshor
t
l
i
fe&lowv al
ueit
ems–s pec
ifi
edinI
FRS1 6a sexe
mp t
ions,andhe
ncesubse
quent
lyme asu
red
a
ccord
ingl
y.Howeve
r,befor
ethesethr
eec oncep
tsaredis
c us
sed,t
heini
ti
almeasu
reme n
tofa
l
eas
eliab
il
it
ymustbeestabl
i
shed.
Aleaseli
abil
i
tyisanobl
ig
ationforacompanyth
a tmustbep
aid.Si
nce
,thi
spay
me n
tistobein
somefutur
etime,i
tisn
ecessaryfort
heamounttobedisc
ount
edb a
cktoit
spr
esen
tvaluei
nthe
book
soft heles
see
.Accordi
ngtoIFRS16,t
hepresentv
alu
eoftheamountt
obepai
dc a
nincl
ude
t
h ef
oll
owingit
ems:
An
yfi
xedp a
yme n
ts
Anyvari
abl
ep ay
me nt
satthes
tar
toft
hele
ase
Re
s i
dualval
ueguarant
ees
Areasonab
lycert
ainopt
ion
stopur
chas
etheas
seta
tth
een
doft
hel
eas
e
p
eri
odTe
rmi
nat
ionp
ena
lti
es
I
nre
tur
nfort
hisl
i
abi
l
it
y,t
hec
omp
anya
cqu
ire
saRi
ghtofUs
eAs
set
,th
ati
sequ
alt
oth
ele
asel
i
abi
l
it
y
a
mou
nt,
plu
san
yle
asep
ayme
ntsma
ded
uri
ngorb
efor
eth
est
artoft
hel
eas
e,a
nyi
ni
ti
ald
ire
ctc
ost
s(e
.g.
,
c
ommi
ssi
onst
oag
ent
s,e
tc.
),a
nddi
sma
ntl
i
ngc
ost
soft
heu
nde
rly
inga
sse
t.Th
us,t
hed
oub
lee
ntr
ytob
e
p
ass
edf
ori
ni
ti
alme
asu
reme
nti
nth
ebook
sofl
ess
eei
sasf
oll
ows
:
$ $
Ri
ghtofUseAsset x
xx
LeaseLi
abi
li
ty x
xx
Bank(i
fdir
ectcos
tsi
ncu
rre
d) x
xx
I
tisa
lsoimp orta
nttoe st
abl
isht h
el eas
ete r
m, asith e
lpsitthepresentval
uecalcul
ati
onaswe ll
a
swh i
ledetermini
ngthed epreci
ationchar
g efortherightofusea ss
et.Theleaseter
mc ane i
the
r
b
e:
Non-can ce
ll
ableperi
od :whichme a
n sthatth
el esseecannotte
rminat
etheleasecontra
ct
overthi
ss peci
fi
edp er
iod.Itbasi
cal
lyincludesthepredet
ermined,i
nit
ial
yearsoverwhich
th
el easespreads.
Ext
e ndedPe r
iodsonlyifreasonabl
yc ert
aintob eexer
cised:thele
sseegive
ntheop t
ionto
ext
e n
dt heleaseperi
oda ndc andoitifth
e yarereason
ab l
ycertai
nthatt
heywillex
erci
se
th
eop tion.
Pe
rio
dal
lowe
dtot
ermi
nat
e,o
nlyi
fre
aso
nab
lyc
ert
ainn
ott
obee
xer
cis
ed:i
fth
ele
sse
eis
r
eas
ona
blyc
ert
aint
hatt
heywi
l
lnotb
eex
erc
isi
ngt
heop
tiont
oex
ten
dth
ele
ase
,th
ent
heya
re
a
ll
owe
dtot
ermi
nat
eth
econ
tra
ctb
efor
eth
epr
opos
ede
xte
nsi
on.
