The carrier Nordelis leases a logistics platform (24,000 per year, paid at year end). At the end of 20X5, after significant leasehold improvements decided by Nordelis and not anticipated at the outset, management becomes reasonably certain to exercise the 2 years-year extension option at the same rent, previously excluded from the lease term. 3 years non-cancellable payments remain; the lease liability is 66,602 (initial rate 4 %). The interest rate implicit in the lease cannot be readily determined and the current incremental borrowing rate is 7 %. Determine the remeasured lease liability and the adjustment to the right-of-use asset (rounded to the nearest euro).
- Lease liability before remeasurement
- 66,602
- Annual payment made at year end
- 24,000
- Non-cancellable payments remaining
- 3
- Years covered by the extension option
- 2
- Incremental borrowing rate at the reassessment date
- 7 %
- Initial discount rate
- 4 %