As a Practical Matter, the Lessee Uses a Single Discount

question 64

Multiple Choice

As a practical matter, the lessee uses a single discount rate for lease analysis, but a more refined approach would do which of the following?

• A)Use a different discount rate for every line on the lease analysis' cash flows, and so reflect differing risk for each cash item
• B)Use a zero discount rate for the lease payment, a high rate only for the CCA tax benefits, and a middle rate for the other cash flows
• C)Use one discount rate for the lease tax shelter, and another for the other cash flows
• D)Use a low, middle, and high discount rate and pick the average result

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Definitions:

Faithful Representation

A qualitative characteristic of financial information that ensures all figures are complete, neutral, and free from material error.

Neutral

A term often used in analysis or discussions to indicate a position or opinion that is unbiased or not leaning towards any particular side or outcome.

Error

A mistake in the collection, recording, or analysis of data, often leading to incorrect results or conclusions.

Canadian GAAP

Generally Accepted Accounting Principles in Canada, a set of accounting standards and practices used in Canada to govern financial reporting.