AASB 16/IFRS 16 Leases Requires Lessors to Account for Lease

question 17

Multiple Choice

AASB 16/IFRS 16 Leases requires lessors to account for lease receipts from operating leases as:

• A) income, on a straight-line basis over the lease term.
• B) revenue, on a reducing balance basis over the lease term.
• C) income, on inception date of the lease.
• D) revenue, at the end of the lease term.

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Definitions:

Hard Rationing

Hard Rationing occurs when external financial constraints prevent a company from obtaining the capital it needs to expand or continue operations, regardless of profitability.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, determined by a company’s fixed versus variable costs.

Operating Cash Flows

The cash generated from the normal operations of a business, reflecting its ability to generate sufficient cash to maintain and develop its operations.