Which of the following statements is incorrect?
A) More onerous disclosure requirements are prescribed for finance leases than operating leases.
B) Depreciation and interest expenses on finance leases may exceed rental payments and result in lower profits being reported in the early years of a finance lease.
C) The capitalisation of a leased asset increases the value of reported non-current assets and increases the return on assets ratio.
D) Depreciation and interest expenses relating to leases are not deductible for tax purposes, so additional liabilities may have to be recognised under IAS 12 Income Taxes when these expenses are less than the deduction for rental payments.

Question

Quizplus · Accepted Answer

The capitalization of a leased asset increases the value of reported non-current assets, but it decreases the return on assets ratio because the denominator (total assets) increases.

Which of the Following Statements Is Incorrect