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

question 16

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 be reasonable 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 be reasonable 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 be reasonable 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.
• E) None of the given answers.

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Definitions:

Short Sale

A financial transaction where an investor sells borrowed securities, anticipating a price decline to buy them back at a lower price.

Mortgage Loan

is a type of loan used to purchase or maintain a home, land, or other types of real estate where the borrower agrees to pay back the lender over a period of time, typically through monthly payments.

Market Value

The current price at which an asset or service can be bought or sold in a fair and open market.

Right To Foreclose

The legal right of a lender or mortgage holder to seize property in the event of nonpayment of debt.