Frequently Asked Questions on IFRS

Chapter 3

Test Your Knowledge

Having worked through the FAQs, you are asked to answer whether the following statements are true or false.

1. The accounting standard that deals with lease accounting is IAS 17.

2. Lease transactions are accounted for by looking at their legal form as opposed to their substance.

3. The determination of whether a lease is classed as a financing lease or an operating lease is based on whether the risks and rewards of ownership have passed over to the lessee.

4. The payments in respect of finance leases are written off directly to profit or loss.

5. ‘Off balance sheet financing’ is permissible under IFRS.

6. If an asset subject to a leasing arrangement is of such a specialized nature that only the lessee can use them without major modifications being made, the lease will be classified as an operating lease.

7. If gains or losses arising from the fluctuation in the fair value of a leased asset accrue to the lessee, this is indicative of a finance lease.

8. If the minimum lease payments is equal to substantially all of the fair value of the leased assets, the lease is a finance lease.

9. The minimum lease payments must equal 95% or more of the fair value of the leased asset in order for the lease to qualify as a finance lease.

10. In calculating the minimum lease payments, contingent rents and executory costs must be included in the calculation.

11. To calculate the present value of the minimum lease payments, the incremental borrowing rate of the lessee ...