LEASE1

According to PFRS 16, lease payments include any amount to be paid for
purchase options that are reasonably certain to be exercised and amounts that
are expected to be paid under residual value guarantees.
True
According to PFRS 16 Leases, a lessee shall classify each of its

leases into finance lease or an operating lease. FALSE
For short-term and low value leases, the lessee may elect to
recognize lease payments as expense over the lease term using
the straight-line basis, or another more appropriate basis. TRUE
When is IFRS 16 effective? For periods beginning on or after January 2019
In most leases, a lessee recognizes an asset and a liability at the commencement
date. TRUE
A right-of-use asset acquired under a lease is measured at which amount
according to IFRS 16 Leases? A. Lease liability + initial direct costs + estimated
costs of dismantling - incentives received
Which, if any, of the following statements is/are true? S1: All entities reporting
under IFRS must comply with IFRS 16 from 1 January 2019. S2: Entities can
choose to apply the standard retrospectively, or prospectively but with a
cumulative adjustment to retained earnings. A. Both S1 and S2
The discount rate used by the lessee in accounting for leases is the C. interest
rate implicit in the lease if determinable, if not then, the lessee's incremental
borrowing rate of interest
What is the major change in the statement of financial position of lessees under
IFRS 16?
D. Entities will record right of use asset and lease liability
An underlying asset is not considered an identified asset for the purpose of

applying the accounting requirements of PFRS 16 if the supplier's substitution
right is not substantive. FALSE
Which of the following is incorrect regarding the accounting for leases by a
lessee? c. according PFRS 16, executory cost
When a lease transfers ownership to the lessee by the end of the lease term, the
underlying asset is depreciated A. over its useful life
Initial direct costs incurred by a lessee are B.capitalized as cost of right-of-use
asset.
Which of the following industries is likely to be the most affected of the new
lease standard? B. The retail industry, due to the high reliance on leased
property
If the supplier has substitution right, D. customer shall account for the contract
as a lease if the supplier's substitution right is not substantive.
According to IFRS 16, lease payments exclude which of the following? A.

Rentals
The current view on accounting for leases by lessees is that all leases are "on-
balance sheet" items, with very minimal exceptions. True
Which of the following is not one of the criteria when determining whether a
contract is or contains a lease? B. Identified liability.
What is the proposed treatment for operating leases in the books of the lessees?
B. Operating leases will cease to exist.
If a lease transfers ownership of the underlying asset to the lessee by the end of
the lease term the underlying asset is depreciated over its useful life or the lease
term, whichever is shorter. False
A right of use asset is initially measured at cost and subsequently measured

using the D. cost, revaluation or fair value model.
A contract is (or contains) a lease if it conveys the right to control the use an
identified asset for a period of time in exchange for consideration. True
What is the expected impact on operating profit following the changes to IFRS
16? C. It will increase due to the expense being split between depreciation and
interest.
What is the expected impact on operating profit following the changes to IFRS
16? D. cONTINGENT RENT BASED ON SALES
A six-year lease expiring on December 31 specifies equal annual lease

payments. Part of this payment represents interest and part represents a
reduction in the net lease liability. The portion of the lease payment in the fifth
year applicable to the reduction of the net lease liability should be B. less than in
the sixth year.
What is the impact on the expected expense under IFRS 16? B.

Finance costs will be higher in the earlier periods to reflect the
outstanding lease liability.
On the lessee's book, the discount rate to be used is the interest rate implicit in
the lease. If this is not determinable, the lessor's incremental borrowing rate is
used.
FALSE
The lessee always uses its incremental borrowing rate in

determining the present value of the minimum lease payments.
False

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According to PFRS 16, lease payments include any amount to be paid for

According to PFRS 16 Leases, a lessee shall classify each of its

An underlying asset is not considered an identified asset for the purpose of

According to IFRS 16, lease payments exclude which of the following? A.

A right of use asset is initially measured at cost and subsequently measured

A six-year lease expiring on December 31 specifies equal annual lease

What is the impact on the expected expense under IFRS 16? B.

The lessee always uses its incremental borrowing rate in

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