Under IAS 17 When Should a Company Classify Its Leases

question 50

Multiple Choice

Under IAS 17 when should a company classify its leases as finance leases?

• A)when the risks and rewards of ownership are transferred to the lessee
• B)all leases are finance leases
• C)all leases are finance leases except for leases of low-value assets and short-term leases
• D)when it is a sale-leaseback lease

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Definitions:

Voidable Title

indicates that a title transfer may be nullified if the buyer discovers the seller did not have ownership rights or authority to sell the item in question.

Good-Faith Purchase

Buying property without knowledge of any existing claims or rights of others, believing the transaction to be honest and legal.

Goods-In-Bailment Contract

A contract where personal property or goods are transferred temporarily into the custody of another for a specific purpose but ownership remains with the bailor.

Simple Delivery Contract

A type of contract in which purchased goods are transferred to a buyer from a seller either at the time of the sale or sometime later by the seller’s delivery.