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Problem 11 - 3 Multiple Choice (IFRS)

1. The classification of a lease is normally carried out at the inception of the lease. 2. Where there is a lease of both land and building, and the title to the land is not transferred, the lease is generally treated as if the land is an operating lease and the building is an operating lease. 3. If a lease includes both land and a building, and splitting the minimum lease payments causes difficulty, the payments should be split according to the relative fair value of the two elements.

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81 views2 pages

Problem 11 - 3 Multiple Choice (IFRS)

1. The classification of a lease is normally carried out at the inception of the lease. 2. Where there is a lease of both land and building, and the title to the land is not transferred, the lease is generally treated as if the land is an operating lease and the building is an operating lease. 3. If a lease includes both land and a building, and splitting the minimum lease payments causes difficulty, the payments should be split according to the relative fair value of the two elements.

Uploaded by

Mobi Dela Cruz
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Problem 11 – 3 Multiple Choice (IFRS)

1. The classification of a lease normally carried out

a. At the end of the lease term


b. After a “cooling off” period of one year
c. At the inception of the lease
d. When the entity deems it to be necessary

2. Where there is a lease of land and building and the title to the land is not transferred,
generally the lease is treated as if

a. The land is a finance lease and the building is a finance lease


b. The land is a finance lease and the building is an operating lease
c. The land is an operating lease and the building is a finance lease
d. The land is an operating lease and the building is an operating lease

3. The lease of a land and building when split cause difficulty in the allocation of the
minimum lease payments. In this case, the minimum lease payments should be split

a. According the relative fair value of two elements


b. By the entity based on the useful life of two elements
c. Using the sum of the digits method
d. According to any fair method devised by the entity

4. The classification of the lease as either operating of finance lease is based on

a. The length of the lease


b. The transfer of the risk and rewards of ownership
c. The minimum lease payments being at least 50% of fair value
d. The economic life of the asset

5. All of the following would prima facie lead to a lease being classified as finance
lease, except

a. Transfer of ownership of the lease at the end of the lease term


b. Option to purchase at a value below fair value of the asset
c. The lease term is for a major part of the asset’s life.
d. The present value of minimum lease payments is 50% of the fair value of the
asset

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