7 - Leases Pt. 1

Question 1

Subsequent measurement of right-of-use asset

Answer 1

Cost model

Question 2

Subsequent measurement of lease liability

Answer 2

Amortized cost financial liability

Question 3

Right-of-use asset is initially measured at?

Answer 3

@ cost

Question 4

Lease liability is initially measured at?

Answer 4

@ PV of lease payment not yet paid

Question 5

Lessee recognizes lease liability & right-of-use-asset at what date?

Answer 5

@ commencement date

Question 6

Define the scope of customer’s right of use (but do not prevent customer from having the right to direct the use of an asset)

Answer 6

Protective rights

Question 7

Potential inflows from asset’s outputs

Answer 7

Economic benefits

Question 8

Explicitly stated in the contract or implicitly specified at time made available for use.

Answer 8

Identified asset

Question 9

Entity has right to control the use of an asset if:

Answer 9

1. Right to obtain all of the economic benefits
2. Right to direct the use of the asset

Question 10

Provides right to use an underlying asset for a period of time in exchange for a consideration

Answer 10

Lessor

Question 11

Obtains right to use the underlying asset for a period of time in exchange for consideration

Answer 11

Lessee

Question 12

Parties to a lease contract are:

Answer 12

Lessor & Lessee

Question 13

Contract or part of contract that conveys right to use an asset for a period of time in exchange for a consideration

Answer 13

Lease

Question 14

Asset on which financial instruments are based on

Answer 14

Underlying asset

Question 15

Portion of an asset is an identified asset if

Answer 15

physically distinct.

Question 16

Asset is not an identified asset if

Answer 16

supplier has substantive right to substitute it throughout the period of use.

Question 17

A suppliers substitution right is presumed not substantive if

Answer 17

it is not readily determinable that it is substantive.

Question 18

Right to obtain economic benefits from use

Answer 18

exclusive use of the asset throughout period.

Question 19

Right to direct the use:

Answer 19

a. customer has right how and for what purpose asset is used
b. asset’s use is predetermined and supplier is not allowed from changing that use.

Question 20

Existence of right to change how and for what purpose asset is used:

Answer 20

a. change the type of output
b. change when output is produced
c. where output is produced
d. change whether output is produced and quantity of it

Question 21

Do not grant right to direct how & for what purpose asset is used but may grant customer right to direct use of asset if purpose is predetermined

Answer 21

Right to operate/maintain

Question 22

Contracts may specify:

Answer 22

1. maximum amount of use
2. require customer to follow particular operating procedures
3. inform supplier of changes how asset will be used

Question 23

Non-cancellable period of a lease

Answer 23

Lease term

Question 24

Lease term covers

Answer 24

a. option to extend the lease if lessee is certain to exercise
b. option to terminate the lease if lessee is certain not to exercise

Question 25

Period which contract is enforceable

Answer 25

Non-cancellable period

Question 26

In assessing if lessee is certain to exercise option entity considers all relevant facts that create

Answer 26

economic incentive for the lease

Question 27

Lease payments are discounted using

Answer 27

Interest rate implicit in the lease

Question 28

If interest rate implicit in the lease is not determinable what is used?

Answer 28

Lessee's incremental borrowing rate

Question 29

Rate of interest that lessee would have to pay to borrow a similar term, and with similar security

Answer 29

Incremental borrowing rate

Question 30

Lessee depreciates the underlying asset over

Answer 30

shorter of asset's useful life and lease term

Question 31

Depreciation starts from

Answer 31

commencement date

Question 32

Expense is higher in the earlier years

Answer 32

Front-loaded

Question 33

Lessee may elect to not apply recognition requirements for

Answer 33

1. Short term leases 2. Leases with low value underlying asset

Question 34

Leases that @ commencement date has lease term of 12 months or less

Answer 34

Short-term lease

Question 35

Lease that contains a purchase option is

Answer 35

not a short-term lease

Question 36

Assessment of value is based on the value of the asset when it is new, regardless of aged asset is being leased

Answer 36

Low valued asset

Question 37

Not affected by materiality or the lessee's size; asset is considered low value regardless whether lessee is small or a big company

Answer 37

Absolute basis

Question 38

Lessee may recognize the lease payments for short-term lease and low valued asset as an

Answer 38

expense on straight line basis

Question 39

Equal depreciation

Answer 39

Straight line basis

Question 40

Lease components are allocated based on the

Answer 40

relative stand-alone price

Question 41

While non-lease components are allocated based on the

Answer 41

aggregate stand-alone price

Question 42

Lessor would charge for a component separately

Answer 42

Relative stand-alone price

Question 43

Separate element if it transfers goods or services to the lessee

Answer 43

Non-lease elements

Question 44

Examples of non-lease elements:

Answer 44

1. Maintenance 2. Security services 3. Supply of utilities 4. Supply of goods 5. Supply of operational services

Question 45

Payments for costs that do not transfer goods or services to the lessee are

Answer 45

not a separate component

Question 46

Allows an entity to elect not to separate the lease and non-lease components of a contract instead account for them as single lease component

Answer 46

PFRS 16

Question 47

Payments that are variable in legal form but unavoidable in substance

Answer 47

In-substance fixed lease payments

Question 48

Payments made by a lessor to a lessee as a reimbursement of costs.

Answer 48

Lease incentives

Question 49

Portion of payments made by lessee to lessor for right to use an asset during the lease term that varies in circumstances occurring after commencement date

Answer 49

Variable lease payments

Question 50

Estimated amount that entity would currently obtain from disposal of an asset (after deducting estimated costs of disposal)

Answer 50

Residual value

Question 51

Lessee accounts for the residual value only if residual value is

Answer 51

guaranteed

Question 52

Guarantee made to a lessor (by party unrelated to lessor) that value of an underlying asset will be at least a specified amount

Answer 52

Residual value guarantee

Question 53

As to lessee, residual value is guaranteed if:

Answer 53

1. guaranteed by lessee 2. guaranteed by party related to lessee