Lease Criteria Under IFRS 16

question 25

Essay

Lease criteria under IFRS 16
Discuss the criteria cited by IFRS 16 to support classifying a lease as a finance lease.

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Definitions:

Lower of Cost or Market

An accounting principle stating that inventory should be recorded at either its historical cost or its market value, whichever is lower.

Inventory

Items such as raw materials, work-in-progress, and finished goods that a company holds for the purpose of sale in the ordinary course of business.

Inventory Management

The systematic approach to ordering, storing, and using a company's inventory, including raw materials, components, and finished products.

Price Declines

A reduction in the market price of goods, services, or securities.