1. Under IFRS, a lessee must recognize a right-of-use asset and lease liability, except for short-term leases or low value leases where the lessee may apply the operating lease model.
2. For a lease to be classified as a low value lease, the underlying asset cannot be of a nature that is typically not of low value when new.
3. To identify the inception of a lease, the earlier date between the lease agreement date and commitment date to the principal provisions of the lease is used.
1. Under IFRS, a lessee must recognize a right-of-use asset and lease liability, except for short-term leases or low value leases where the lessee may apply the operating lease model.
2. For a lease to be classified as a low value lease, the underlying asset cannot be of a nature that is typically not of low value when new.
3. To identify the inception of a lease, the earlier date between the lease agreement date and commitment date to the principal provisions of the lease is used.
1. Under IFRS, a lessee must recognize a right-of-use asset and lease liability, except for short-term leases or low value leases where the lessee may apply the operating lease model.
2. For a lease to be classified as a low value lease, the underlying asset cannot be of a nature that is typically not of low value when new.
3. To identify the inception of a lease, the earlier date between the lease agreement date and commitment date to the principal provisions of the lease is used.
1. Under IFRS, a lessee must recognize a right-of-use asset and lease liability, except for short-term leases or low value leases where the lessee may apply the operating lease model.
2. For a lease to be classified as a low value lease, the underlying asset cannot be of a nature that is typically not of low value when new.
3. To identify the inception of a lease, the earlier date between the lease agreement date and commitment date to the principal provisions of the lease is used.
a. Right of use asset and lease liability b. Right of use asset but not lease liability c. Lease liability but not right of use asset d. Neither right of use asset nor lease liability
2. The lessee may apply the operating lease model under what condition? a. Short-term lease b. Both short-term lease and low value lease c. Low value lease d. Under all circumstances
3. Which of the following statements is true about low value lease?
a. The value of an underlying asset is based on the value of the asset when new regardless of the age of the asset. b. The term of a low value lease may be more than twelve months. c. An underlying asset does not qualify as low value lease if the nature of the asset is such that the asset is typically not of low value when new. d. All of these statements are true about low value lease.
4. The cost of right of use asset comprises all, except
a. The present value of lease payments b. Lease payments made to the lessor on or before commencement date c. Initial direct cost incurred by lessee d. Estimated cost of dismantling, removing or restoring the underlying asset for which the lessee has no present obligation
5. A lessee with a lease containing a purchase option that is reasonably certain to be exercised should depreciate the right of use asset over a. Useful life of the asset b. Useful life of the asset or the lease term, whichever is shorter c. Lease term d. Useful life of the asset or the lease term, whichever is longer
6. The lease payments include all of the following, except
a. Fixed lease payments b. Variable lease payments c. Exercise price of a purchase option that is not reasonably certain to be exercised d. Residual value guarantee of the lessee
7. It is the date on which the lessee is entitled to exercise its right to use the leased asset. a. Inception of the lease b. Date of lease agreement c. Commencement of the lease d. Date of commitment to the provision of the lease
8. Which of the following dates is used to identify the inception of a lease?
a. The date of the lease agreement b. The date of the commitment by the parties to the principal provisions of the lease c. The earlier of the date of the lease agreement and the date of commitment by the parties to the principal provisions of the lease
1 10_Leases Theory of Accounts d. The later of the date of the lease agreement and the date of commitment by the parties to the principal provisions of the lease
9. The classification of a lease as operating or finance is normally carried out
a. At the end of lease term b. At the inception of the lease c. After a “cooling off” period of one year d. When the entity deems it necessary
10. Which of the following situations would prima facie lead to a lease being classified as an operating lease? a. Transfer of ownership to the lessee at the end of the lease term. b. Option to purchase at a value below the fair value of the asset. c. The lease term is for a major part of the asset’s life. d. The present value of the lease payments is 50% of the fair value of the asset.
11. Which of the following is a correct statement of one of the lease capitalization criteria? a. The lease transfers ownership of the property to the lessor. b. The lease contains a purchase option. c. The lease term is equal to or more than 75% of the economic life of the leased property. d. The lease payments excluding executory costs equal or exceed 90% of the fair value of the lease property.
12. Which of the following is not included in the definition of lease payments? a. Any payment required by a purchase option that is reasonably certain b. Costs for services and taxes to be paid by and reimburse to the lessor c. Required payments over the lease term d. Any amounts guaranteed by a party related to the lessee
13. It is the portion of the residual value of the lease asset, the realization of which by the lessor is not assured or is guaranteed solely by a party related to the lessor. a. Residual value b. Unguaranteed residual value c. Guaranteed residual value d. Minimum lease payment
14. Initial direct costs incurred by a lessor in a sales type lease are a. Charged to unearned income in the first period of the lease term. b. Charged to expense immediately when the selling profit is recognized. c. Deferred and allocated over the lease term in proportion to the recognition of rent revenue. d. Deferred and allocated over the lease term on a straight line basis.
2 10_Leases Theory of Accounts
15. Under a sales type lease, what is the meaning of “gross investment in the lease”? a. Present value of minimum lease payments b. Present value of minimum lease payments and unguaranteed residual value c. Absolute amount of the minimum lease payments d. Aggregate of minimum lease payments and unguaranteed residual value
16. Lessors shall recognize asset held under a finance lease as a receivable at an amount equal to a. Gross investment in the lease b. Gross rentals c. Net investment in the lease d. Residual value, whether guaranteed or unguaranteed
17. Which of the following would not be included in the lease receivable account? a. Guaranteed residual value b. A purchase option that is reasonably certain c. Unguaranteed residual value d. All would be included
18. The interest rate implicit in the lease is the discount rate that causes the aggregate of the present value of the lease payments and the unguaranteed residual value to equal the a. Fair value of the leased asset b. Fair value of the leased asset and initial direct costs of the lessor c. Fair value of the leased asset and initial direct costs of the lessee d. Gross investment in the lease.
19. Lease payments under an operating lease shall be recognized by the lessor as income using the a. Cash method b. Sum of years’ digits method c. Declining balance method d. Straight line method, unless another systematic basis is representative of the time pattern of the user’s benefit.
20. Which of the following statements is false in accounting for sale and leaseback transaction by the seller-lessee if the transfer of the asset is a sale? a. The seller-lessee shall measure the right-of-use asset arising from the leaseback at the proportion of the previous carrying amount of the asset that relates to the right of use retained by the seller-lessee. b. The seller-lessee shall recognize only the amount of any gain or loss that relates to the rights transferred to the buyer-lessor. c. If the sale and leaseback transaction results in a finance lease any gain/loss should be deferred and amortized. d. If the sales price is higher than the fair value of the asset, the difference shall be accounted for as additional financing provided by the buyer-lessor to the seller-lessee.
