Which of the following statement is true?
A) Operating leases under GAAP are referred to as finance leases under IFRS.
B) IFRS has an additional lessor criterion for capitalization that collectability of the payments required from the lessee is reasonably predictable.
C) IFRS is more general in its provisions for determining if a lease arrangement transfers the risks and rewards of ownership.
D) Under IFRS, in computing the present value of the minimum lease payments, the lessee is required to use the incremental borrowing rate.

Question

Quizplus · Accepted Answer

Under IFRS, the test for determining if a lease arrangement transfers the risks and rewards of ownership is more general and relies on the substance of the arrangement. GAAP has specific criteria that must be met for a lease to be classified as a capital lease. Option A is incorrect, as operating leases are not referred to as finance leases under IFRS. Option B is also incorrect, as collectability of payments is a criterion under both GAAP and IFRS. Option D is partially correct, but it only applies to the lessee's calculation of the present value of minimum lease payments. The lessor's discount rate is not specified under IFRS.

Which of the Following Statement Is True