A finance lease is defined in AASB 16/IFRS 16 as:
A) a lease that is not classified as an operating lease.
B) a lease that does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset.
C) a rental agreement of less than 12 months' duration.
D) a lease that transfers substantially all the risks and rewards incidental to ownership of an underlying asset.

Question

Quizplus · Accepted Answer

A finance lease is a lease in which the lessee acquires substantially all the risks and rewards incidental to ownership of the leased asset. This means that the lessee is responsible for maintaining and servicing the asset, and bears the risk of any residual value at the end of the lease term. As a result, the lease is treated as a purchase of an asset by the lessee for accounting purposes, and the lease payments are treated as repayments of a loan.

A Finance Lease Is Defined in AASB 16/IFRS 16 As