In determining if the risk and rewards of ownership have been transferred,AASB 117 states the following would indicate a finance lease is in effect:
A) Ownership of the assets transfers at the end of the lease term for a variable payment equal to its then fair value.
B) Contingent rents exist.
C) The lease is non-cancellable by the lessor.
D) The lease term is for a major part of the economic life of the asset.
E) All of the given answers.

Question

Quizplus · Accepted Answer

AASB 117 requires all of the mentioned indicators to be present in order to determine if a lease is a finance lease. These indicators are ownership transfer at the end of the lease term for a variable payment equal to its then fair value, the presence of contingent rents, non-cancellable lease by the lessor, and lease term being for a major part of the economic life of the asset. Therefore, option E is the best choice.

In Determining If the Risk and Rewards of Ownership Have