Which of the following conditions qualifies a lease as a finance lease?
A) The present value of the minimum lease payments covers substantially all of the fair value of the property at the inception of the lease.
B) The lease term covers the majority of the asset's economic life.
C) The lease transfers the risks and benefits of ownership to the lessee.
D) The leased asset is specific to the needs of the lessee and without significant changes would not be of use to another company.
E) All of these answers are correct.

Question

Quizplus · Accepted Answer

All of these conditions are required for a lease to be classified as a finance lease according to International Financial Reporting Standards (IFRS). The present value of the minimum lease payments must cover substantially all of the fair value of the leased property at inception, the lease term must cover the majority of the asset's economic life, and the risks and benefits of ownership must be transferred to the lessee. Additionally, the leased asset must be specific to the needs of the lessee and without significant changes would not be of use to another company. Therefore, all of these conditions must be met for a lease to be classified as a finance lease.

Which of the Following Conditions Qualifies a Lease as a Finance