Company A is a manufacturer of motorbikes. They normally sell the bikes but this year leased 15 bikes to company B over a 3 year term. there was an upfront payment of 100,000. Annual payments are made in arrears. the normal selling price is 1.8 million. After the 3 year term the customer has an option to pay a small fixed amount to take legal ownership of the bikes, until then, Company A retains legal title. Received already is the 100,000 payment and first lease payment.

Company A accounting treatment:

Is it correct to recognise these as revenue because they are lease income?

What further information is needed?

Why is revenue from the lease different to the lease rental income received in the year?

Explain application of the relevant IFRs and concept behind adjustments

Answer rating: 100% (QA)

Recognizing lease income as revenue depends on the nature of the lease and compliance with accounting standards such as IFRS 16 for leases Lets addres... View the full answer