Under IAS 17,which of the Following Examples Is Not a Situation

question 35

Multiple Choice

Under IAS 17,which of the following examples is not a situation that would normally lead to a lease being classified as a finance lease?

• A) The leased assets are useful for the lessee.
• B) The lease transfers ownership of the asset to the lessee by the end of the lease term.
• C) The lessee has the option to purchase the asset at a price that is expected to be sufficiently lower than 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.
• D) The lease term is for the major part of the economic life of the asset even if the title is not transferred.

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Definitions:

Common Stock

The most usual type of corporate stock. It carries with it all the risks of the business and does not guarantee its holder the right to profits.

Capital upon Dissolution

The remaining assets available for distribution to the shareholders or partners after a firm's liabilities have been settled during dissolution.

Limited Liability

The legal principle where an individual's financial risk is restricted to a fixed amount, typically the value of their investment in a company, protecting personal assets from business debts and obligations.