Delta owned two assets which were sold on 1 April 20X1 - the first day of Delta's accounting period. Both assets were sold for their fair value. Details of the sales are as follows:
Asset 1
Asset 1 was sold for £500,000 and leased back on a five-year lease. The carrying amount of the asset at the date of sale was £360,000 and its estimated future economic life was ten years. The terms of the lease were that Delta would make five annual payments of £60,000 for the use of the asset. This transaction qualifies as a sale of the asset by Delta under the provisions of IFRS 15 Revenue from Contracts with Customers.
Asset 2
Asset 2 was sold for £600,000 and leased back on a ten-year lease. The carrying amount of the asset at the date of sale was £540,000 and its estimated future economic life was ten years. The terms of the lease were that Delta would make ten annual payments of £77,700 for the use of the asset. This transaction does not qualify as a sale of the asset by Delta under the provisions of IFRS 15 Revenue from Contracts with Customers.
Required:
Describe how both these assets and transactions would be reported under IFRS 16 in the financial statements of Delta for the year ended 31 March 20X2. The implicit rate of interest in both leases is 5% per annum?