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Finance lease

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Finance lease

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by AvatarStephen Widberg.
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  • June 17, 2022 at 8:00 am #658909
    Avatargakuseiacca
    Participant
    • Topics: 3
    • Replies: 0
    • ☆

    Question in study test:
    The building has a remaining useful life of 50 years. The lease term,
    which would commence on 1 January 20X0, is for 30 years.

    Answer:
    The lease term is only for 60% (30 years/50 years) of the asset’s useful
    life. This factor suggests that the lease is an operating lease.

    One of the indicator of Finance lease is:
    “The lease term is for the major part of the asset’s economic life.”
    How to define major part? I was thinking 60% should be a major part.

    June 17, 2022 at 8:37 am #658910
    AvatarStephen Widberg
    Keymaster
    • Topics: 17
    • Replies: 3452
    • ☆☆☆☆☆

    It is a judgement call. In a similar standard in the US they indicate 75%, which I think is about right. So, you didn’t get it from me 🙂 , but you can use 75% – though obviously consider all the other factors re risk / reward transfer.

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