Bishop Company is the lessee in an operating lease. Bishop will report straight-line lease expense if it uses:
A) IFRS.
B) U.S. GAAP.
C) Either U.S. GAAP or IFRS.
D) Neither U.S. GAAP nor IFRS.

Question

Quizplus · Accepted Answer

Under IFRS No. 16, all leases are accounted for as finance leases by the lessee (one-model approach). Only lessors apply the classification criteria to distinguish between finance and operating leases. Thus, even for leases that qualify under U.S. GAAP (two-model approach) as operating leases, the lessee amortizes the right-of-use asset on a straight-line basis rather than "plugging" that amount to cause the total of interest and amortization to be a straight-line amount. This means that those leases under IFRS will have a front-loaded expense profile (because interest expense is more at the beginning than at the end).

Bishop Company Is the Lessee in an Operating Lease