The Use of an Unrealistically Low Discount Rate Could Lead

question 49

True/False

The use of an unrealistically low discount rate could lead to a lessee recording a leased asset at an amount exceeding the fair value of the equipment, which is generally prohibited in IFRS.

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Definitions:

Depreciation Expense

A charge that reflects the cost of using fixed assets over their useful life.

Plant Assets

Durable assets with physical form, employed in running a company and not meant for resale.

Year Ended

The conclusion of a 12-month accounting period, at which financial statements are prepared.

Straight-Line Method

A depreciation technique that allocates an equal amount of depreciation to each year of the asset's useful life.