Assume that the operating rental commitment for 2009 due between 1-5 years is distributed equally over the years 2011-2014, i.e. 2700m/4= $675m. The commitment due beyond year 5 in total is $1186m. The number of years beyond year 5 is calculated by dividing the total amount of commitments due beyond year 5 (> 2014) by the amount of commitments due in year 5, i.e.1186/675=1.757=2 years. This means the total discount period equals 5 years + 2 years = 7 years. Assume that for the years beyond year 5, payments are also distributed equally.
Payment schedule (perspective from 2009) | t= | Payment | Present value | 2009 | 0 | 0 | 0 | 2010 | 1 | 798 | 725.5 | 2011-2016 | 2~7 | 675 | 2672.5 | | | Net present value | 3398 | Liability:
From the 2009 perspective, payments of $798m are due in the year 2010. One part refers to interests that Qantas has to pay on the liability (10% x 3398 = 340m). The remaining difference (798 – 340 = $458 m) reduces the value of liability. Hence, in 2010, the liability equals 3398-458= $3058 m . Right of use asset: In 2009, the right of use asset is also 3398 million. Life of leases is assumed to equal the total discount period, i.e. 12 years. The right of use asset is amortised on a straight line basis.
In 2010, the right of use asset is therefore amortised by 3398/12 = $283m. Therefore, the right of use asset is $3115m ($3398-$283). Appendix 2.1 Balance Sheet Adjustments for 2010
Total assets (adj) = total assets (reported) + NPV of operating lease – 1 year of amortisation = total assets (reported) + right of use asset = 19,910 + 3,115 = $ 23,025m
Total liabilities (adj) = total liabilities (reported) + NPV of operating lease - 1 year of pay-off