Classify the lease under ifrs, and then under aspe

Reference no: EM133609337

Question: On 24 February 20X1, Rohit Distributing Ltd., a private company, signed a lease for conveyor equipment. This is specialized equipment that can be used only in Rohit's manufacturing plant. The fair value of the leased equipment is $500,000. The lease will commence on 1 October 20X1. The lease is for four years with lease payments of $120,000 per year, due at the beginning of each year. The lessor does not require a residual value guarantee. The equipment's estimated economic life is 10 years. Rohit's incremental borrowing rate is a nominal 6% per annum, and the interest rate implicit in the lease is 7%.

Required: Classify the lease under IFRS, and then under ASPE. Include an evaluation of all guidelines.

Reference no: EM133609337

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