Ooh, thought that this was going to be a technical rather than principle type question.
you might be missing that the lease is an asset that can be traded.
Taking a non commercial example, if you purchased a house that was leasehold you would not expect to live in that house for 99 years but you would want the security that it could not be sold from under you after 25 and also the knowledge that you would be able to sell that house on once you have paid for it.
Similarly a small business owner may purchase a shop on similar terms of a 99 year lease and again, they are free to sell the shop with lease term remaining (dependant upon the terms of the lease of course but long term leases will always have a clause to allow for the lease to be transfered).
When doing your calculations don't forget that when a long term lease is sold on with less than 50 years to run it becomes a short term lease.
Also, which calculation are you using for short term leases?
The books and tutors seem to prefer the :
Premium - (2%*(number of years remaining - 1) * Premium)
I prefer
Premium * (51 - number of years remaining)/50)
Do a few examples from your studies and you'll see that the end answer comes out the same
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Funny how you brought that up (different ways of calculating to gain the same result)
That tax exam i just sat, i got me a question which i had to fill out the answers in some boxes as set out by the AAT. Now i know how to calculate the correct answer but they wanted it in a different format than i have taught myself.
It didn't half throw me, trying to understand the wording as well. Got my head around it after the flapping subsided, but i came away thinking that with a paper based exam i would have done just fine showing my workings.
Basically my workings mainly have to do with fitting all the figures on a calculator, so i tend to divide first then times, a bit ass about face but hey ho, i know what i'm doing (sort of)
Sounds as though you use a calculator in the same way as myself.
You are going to need a couple of 10+ digit desktop calculators for your exams (main and backup calculators, and you'll need a scientific one for papers F5 and P5 to answer questions related the the learning curve effect which use logarithms... And you'll also need me to explain it cos the books do a really lousy job of it (#1)(#2)).
to my mind the best calculators still available on the market is the Staples 550 (only £5.99)... I've got six as never know when they'll stop making them.
and the best that I have used (one of three still alive) is the Xerox XRX-250 (which explains my reasoning behind buying 6 staples 550's).
Next. As you've spotted the ACCA will expect to see your workings and there are often several methods of getting to the right result all of which would be acceptable (say goodbye to any fill in the gaps type answers or even only one right answer type questions).
I think there may be some positive discrimination in the minds of the markers for obvious real life calculations over the book ones. VAT springs to mind in that I don't know how the latest books relay it but back when I did F6 (then still 2.3) the books said to calculate VAT one way but everyone in the real world used the *7/47 calculation for 17.5% VAT.
kind regards,
Shaun.
#1 I hate scientific calculators. I don't trust any calculator where I don't approximately know the answer before it does otherwise how do you know that it's not lieing to you!
#2 it took me half a day working back from the answer to get the how the calculation came to the results stated in the study text. I'd come accross complex formulae before (regression analysis springs to mind) but at least they made sense. When you've found dozens of errors in a text and you cannot get a formulae to work the assumption is that it's another mistake but in this instance they had got it right.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
