In IFRS 16 par. 74, initial direct costs incurred by a lessor in consummating a manufacturer’s or dealer’s lease are A. charged to unearned income in the first period of the lease term. B. charged to expense in the first period of the lease term. 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.

In IFRS 16 par. 74, initial direct costs incurred by a lessor in consummating a manufacturer’s or dealer’s lease are A. charged to unearned income in the first period of the lease term. B. charged to expense in the first period of the lease term. 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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Problem 1Q

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t27 In IFRS 16 par. 74, initial direct costs incurred by a lessor in consummating a manufacturer’s or dealer’s lease areA. charged to unearned income in the first period of the lease term.B. charged to expense in the first period of the lease term.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.
For a lessor, the leased asset appears on the balance sheet and continues to be depreciatedwhen the lease is classifi ed as:A . a sales-type lease.B . an operating lease.C . a fi nancing lease.
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Part 1: New Lease Accounting – IFRS 16 Leases Effect Analysis. What are the top three industries most affected by IFRS 16 as measured by the present value of future payments for off-balance-sheet leases to total assets? Which leased assets propel them to the top three? Also, discuss the extent that smaller firms would be affected by IFRS 16. Which payments are to be included in the measurement of lease assets and lease liabilities? Also, discuss the pros and cons of excluding the following payments from the measurement. Variable lease payments linked to future use or sales Optional payments relating to lease-extension option when a lessee is not reasonably certain to exercise the option. Discuss the effects of the new accounting on the following items and ratios of lessees. Provide reason(s) behind all effects. EBITDA, operating profit, and profit before tax Operating cash flow, financing cash flow, and total cash flow Debt to equity, current ratio, and return on total assets
Under ASC 842 when are lease classification and initial measurement determined? within one year of commencement can not be determined at the lease inception at the lease commencement
(4) In a lease that is appropriately recorded as a direct-financing lease by the lessor, unearned income A. should be amortized over the period of the lease using the effective interest method. B. should be amortized over the period of the lease using the straight-line method. C. does not arise. D. should be recognized at the lease's expiration. E. None of these answer choices are correct.
How will a 20-year lease obligation appear on the lessee's statement of financial position? a.as a long-term liability, only if an operating lease b.as a long-term liability, only if a finance lease c.as a long-term liability for any lease, operating or finance d.as a long-term asset for an operating lease
Which of the following are normal characteristics of a financial lease? I. Maintenance of the leased asset is the responsibility of the lessee. II. The lease is generally cancellable by the lessee prior to the expiration date. III. Financial leases are generally fully amortized. IV. The lessee usually has the right to renew the lease at the end of the initial lease period. Select one: O a. I, II, III, and IV O b. I, II, and IV only O c. II, II, and IV only O d. I and Il only Oe. I and II only
D6) Describe the criteria that the lessee must utilize when determining whether a lease is to be treated as a finance lease or as an operating lease according to ASC 842. Original answer.
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