PFRS 16 LEASES

Proforma Journal Entries and Restatement Entries

Option 1: Full Retrospective Approach

#### Entry Made: DR CR Should be entry: DR CR Restatement in January 1, 2018: DR CR

Rent expense 100,000.00 ROU Asset 457,970.72 ROU Asset 366,376.57

Input VAT 12,000.00 Deferred input VAT (12,000 VAT x 5 years) 60,000.00 Deferred input VAT 48,000.00
Lease Liability 107,000.00 Lease Liability 492,970.72 RE, beg. 3,733.29
Withholding tax payable - expanded 5,000.00 Deferred withholding tax payable - expanded (5,000 x 5 years) 25,000.00 Deferred tax asset 1,599.98
To record rent expense To record ROU asset and lease liability Lease Liability 399,709.84
Deferred withholding tax payable - expanded 20,000.00
Lease Liability 107,000.00 Depreciation 91,594.14 To record the effect of adoption of PFRS 16
Expanded withholding tax payable 5,000.00 Accum. dep'n-ROU Asset 91,594.14
Cash 112,000.00 To record depreciation of ROU Asset
To record payment made in 2017
Input VAT 12,000.00
Deferred input VAT 12,000.00
Note: Payment should be equal to To record reversal of deferred input VAT upon payment

Deferred withholding tax payable - expanded 5,000.00

Withholding tax payable - expanded 5,000.00
To record reversal of deferred WT upon payment

Lease Liability 93,260.88

Interest Exp. 13,739.12
Expanded withholding tax payable 5,000.00
Cash 112,000.00
To record payment made in 2017

Deferred tax asset 1,599.98

Provision for income tax - deferred 1,599.98
To record provision for DTA on the difference per PAS 17 vs PFRS 16

#### Entry Made: DR CR Should be entry: DR CR Restatement of comparative period (2018)

Rent expense 100,000.00 Depreciation 91,594.14 Lease liability 95,848.70

Input VAT 12,000.00 Accum. dep'n-ROU Asset 91,594.14 Interest Expense 11,151.30
Lease Liability 107,000.00 To record depreciation of ROU Asset Deferred withholding tax payable - expanded 5,000.00
Withholding tax payable - expanded 5,000.00 Operating expense 100,000.00
To record rent expense Input VAT 12,000.00 Deferred input VAT 12,000.00
Deferred input VAT 12,000.00 To record retatement of comparative year
Lease Liability 107,000.00 To record reversal of deferred input VAT upon payment
Expanded withholding tax payable 5,000.00 Deferred tax asset 823.63
Cash 112,000.00 Deferred withholding tax payable - expanded 5,000.00 Provision for income tax - deferred 823.63
To record payment made in 2018 Withholding tax payable - expanded 5,000.00 To record provision for DTA on the difference per PAS 17 vs PFRS 16
To record reversal of deferred WT upon payment

Lease Liability 95,848.70

Interest Exp. 11,151.30
Expanded withholding tax payable 5,000.00
Cash 112,000.00
To record payment made in 2017
#### Entry Made: DR CR Should be entry: DR CR Restatement of comparative period (2018)

Deferred tax asset 823.63

Provision for income tax - deferred 823.63
To record provision for DTA on the difference per PAS 17 vs PFRS 16

Option 2: Modified Retrospective Approach

#### Equity adjustment in January 1, 2019 DR CR

ROU Asset 274,782.43

RE, Beg. 5,655.09
Deferred input VAT 36,000.00
Deferred tax asset 2,423.61
Lease Liability 303,861.14
Deferred withholding tax payable - expanded 15,000.00
To record the effect of adoption of PFRS 16

Entry for 2019: DR CR Entry for 2020: DR CR Entry for 2021: DR CR

Depreciation 91,594.14 Depreciation 91,594.14 Depreciation 91,594.14
Accum. dep'n-ROU Asset 91,594.14 Accum. dep'n-ROU Asset 91,594.14 Accum. dep'n-ROU Asset 91,594.14
Depreciation of ROU Asset Depreciation of ROU Asset Depreciation of ROU Asset

Input VAT 12,000.00 Input VAT 12,000.00 Input VAT 12,000.00

Deferred input VAT 12,000.00 Deferred input VAT 12,000.00 Deferred input VAT 12,000.00
Reversal of deferred input VAT upon payment Reversal of deferred input VAT upon payment Reversal of deferred input VAT upon payment

Deferred withholding tax payable - expanded 5,000.00 Deferred withholding tax payable - expanded 5,000.00 Deferred withholding tax payable - expanded 5,000.00
Withholding tax payable - expanded 5,000.00 Withholding tax payable - expanded 5,000.00 Withholding tax payable - expanded 5,000.00
Reversal of deferred WT upon payment Reversal of deferred WT upon payment Reversal of deferred WT upon payment

Lease Liability 98,514.17 Lease Liability 101,259.59 Lease Liability 104,087.38

Interest Exp. 8,485.83 Interest Exp. 5,740.41 Interest Exp. 2,912.62
Expanded withholding tax payable 5,000.00 Expanded withholding tax payable 5,000.00 Expanded withholding tax payable 5,000.00
Cash 112,000.00 Cash 112,000.00 Cash 112,000.00
To record payment made in 2019 To record payment made in 2019 To record payment made in 2019

Deferred tax asset 23.99 Provision for income tax - deferred 799.63 Provision for income tax - deferred 1,647.97
Provision for income tax - deferred 23.99 Deferred tax asset 799.63 Deferred tax asset 1,647.97
To record provision for DTA on the difference per PAS 17 vs PFRS 16 To record reversal of DTA on the difference per PAS 17 vs PFRS 16 To record reversal of DTA on the difference per PAS 17 vs PFRS 16

Note: As of year 5 (2021), ROU asset, Lease liability and DTA should be equal to nil.