Under IFRS,a lessee may classify some assets held under leases as investment property which allows the lessee to
A)Avoid recording depreciation expense for the assets.
B)Account for the assets using either historical cost or fair value.
C)Use the higher of the implicit or the incremental borrowing rate when computing the present value of the minimum lease payments.
D)All of the choices are correct.

Question

Quizplus · Accepted Answer

Under IFRS, a lessee may classify some assets held under leases as investment property only for the purpose of accounting, and not for legal purposes. This allows the lessee to account for the assets using either historical cost or fair value, but they still need to record depreciation expense for the assets. Furthermore, the lessee needs to use the rate implicit in the lease, if it is practicable to determine, otherwise, they can use the lessee's incremental borrowing rate, to compute the present value of the minimum lease payments. Therefore, options A and C are incorrect, and the correct option is B.

Under IFRS,a Lessee May Classify Some Assets Held Under Leases