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Leases

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Viewing 5 posts - 1 through 5 (of 5 total)
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  • April 20, 2020 at 12:48 am
    Leases 2
    mcnorman
    Participant

    According to IFRS 16 Leases, which of the following is generally considered to be a characteristic of an operating, rather than a finance, lease?

    A. Ownership of the assets is passed to the lessee by the end of the lease term

    B. The lessor is responsible for the general maintenance and repair of the assets

    C. The present value of the lease payments is approximately equal to the fair value of the asset

    D. The lease term is for a major part of the useful life of the asset

    April 23, 2020 at 7:57 pm
    Leases 3
    P2-D2
    Keymaster

    Hi,

    So what is your answer? What is it that you’re specifically stuck upon? If you let me know then I can help out.

    Thanks

    May 2, 2020 at 10:43 pm
    Leases 2
    mcnorman
    Participant

    Hello Chris,

    Thanks for the response.

    I believe it is A. Ownership is passed to the lessee

    May 2, 2020 at 11:01 pm
    Leases 2
    mcnorman
    Participant

    Hello Chris,

    The option which is confusing me is option B.

    May 10, 2020 at 3:13 pm
    Leases 3
    P2-D2
    Keymaster

    Hi,

    This is looking at the criteria for lessor accounting (is it on the syllabus?) and it will be an operating lease if the risks and rewards remain with the lessor.

    In A, the risks are assumed to be with the lessee as ownership transfers. So it isn’t the right answer.

    In B, the risks of damage are with the lessor as they have pay for any repairs. So it is the right answer.

    Thanks

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