JMR Company Leases an Asset from KAR Company

question 97

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 KAR should use for discounting the net lease payment is:

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

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Definitions:

Divisional Profits

The earnings generated by distinct segments or divisions within a larger company, often used to assess their financial performance.

Invested Capital

The total investment in a company by shareholders and debt holders, representing the funds used to operate and grow the business.

Asset Turnover

A financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue.

Invested Capital

The total amount of money that shareholders and debt holders have committed to a company for its operations.