The Term 'Bargain Purchase Option' Is Not Used Explicitly in AASB

question 10

Multiple Choice

The term 'bargain purchase option' is not used explicitly in AASB 117 but is described as:

• A) the option to purchase the leased asset for significantly less than its cost at the date the option becomes exercisable, for it to be reasonably certain at the inception of the lease, that the option will be exercised.
• B) the option to purchase the asset at a price that is expected to be sufficiently lower that the fair value at the date the option becomes exercisable, for it to be reasonably certain at the inception of the lease, that the option will be exercised.
• C) being in place when the lessee is guaranteed to undertake the option at the end of the lease.
• D) the option to purchase the asset at a price that is expected to be sufficiently lower that the fair value at the date the option becomes exercisable, for it to be reasonably certain at the inception of the lease, that the option will be exercised and being in place when the lessee is guaranteed to undertake the option at the end of the lease.

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Definitions:

Rate Of Interest

The percentage of the principal that will be charged for a particular period of time, normally one year.

Interest

The charge for borrowing money or the return on deposited funds, typically expressed as a percentage rate over a period of time.

Simple Annual Interest Rate

The percentage of the principal amount that will be charged or earned as interest, calculated once per year without compounding.

Investment

The allocation of resources, such as capital, with the expectation of generating an income or profit.