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Point to Point Ltd provides a service,transporting passengers from Hosea Kutako International Airport to hotels in Windhoek City and the surrounding areas.
It enters a contact with Bust Ltd for the lease of five,25-seater buses for a period of 3 years. The lease payments are constant over the lease term. The market for airport transfer is constantly changing and Point to Point Ltd may need to use similar 25-seater buses or large 40-seater buses,depending on whether other models of transport become available or not.As such the contract allows Point to Point Ltd to cancel the lease at the end of first year or at the end of second year without any penalty.
Required:
Question 1: Discuss with reference to IFRS 16 Leases: How Point to Point Ltd should account for this lease contract
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