Under IFRS,which of the following is an indicator of a situation (individually or in combination)that could lead to a lease being classified as a finance lease?
A)If the lessor can cancel the lease,the lessee's losses associated with the cancellation are borne by the lessor.
B)The lessee has the ability to continue the lease for a secondary period at a rent that is substantially lower than market rent.
C)Gains or losses from the fluctuation in the fair value of the residual accrue to the lessor.
D)All of the choices are indicators.

Question

Quizplus · Accepted Answer

Under IFRS, a lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset to the lessee. One indicator of a finance lease is if the lessee has the option to continue the lease for a secondary period at a rent significantly lower than market rent, suggesting the lessee is likely to obtain ownership or benefits similar to ownership. Choices A and C describe situations where risks and rewards remain with the lessor, indicative of an operating lease, not a finance lease.

Under IFRS,which of the Following Is an Indicator of a Situation