JMR Company Leases an Asset from KAR Company

question 173

Multiple Choice

JMR Company leases an asset from KAR Company.The rate implicit in the lease is 12% and JMR's incremental borrowing rate is 11%.JMR is aware of the implicit rate.Assuming that both rates would provide an MLP amount well below the fair value of the leased asset, the rate that JMR should use for discounting the net lease payment is:

• A)11% under ASPE and 12% under IFRS.
• B)12% under ASPE and 11% under IFRS.
• C)12% under both ASPE and IFRS.
• D)11% under both ASPE and IFRS.

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Definitions:

Licensing

The granting of a legal permission by one entity to another, allowing the latter to engage in an activity that is under the control or ownership of the former.

Wholly Owned Subsidiaries

Companies whose entire share capital is held by another company, typically referred to as the parent company.

Intellectual Property

Legal rights that protect creations of the mind, such as inventions, literary and artistic works, designs, symbols, names, and images used in commerce.

Greenfield Operation

A greenfield operation involves a company starting a new venture from the ground up in a foreign country, rather than purchasing or partnering with an existing local company.