The logistics provider Verlaine leases a fleet of forklift trucks. To secure its equipment during a multi-year customer contract, it negotiates with the lessor an extension of the lease by 2 years, at the same annual payment of 36,000 made at year end, with no additional truck. Before the amendment, 3 payments remained and the lease liability was 99,903 (initial rate 4 %). The incremental borrowing rate at the effective date is 6 %, the implicit rate not being determinable. Determine the modified lease liability and the adjustment to the right-of-use asset (rounded to the nearest euro).
- Annual payment made at year end
- 36,000
- Payments remaining before the amendment
- 3
- Negotiated extension (years)
- 2
- Lease liability before the modification
- 99,903
- Initial discount rate
- 4 %
- Incremental borrowing rate at the effective date
- 6 %