USGAAP and IFRS Provide Criteria for Distinguishing Operating Leases from Capital

question 88

Multiple Choice

U.S.GAAP and IFRS provide criteria for distinguishing operating leases from capital leases.Which of the following is true?

• A)Firms cannot currently apply the fair value option to capital leases.
• B)When the lessor enjoys the benefits and bears the risk, the lease is an operating lease.
• C)When the lessee enjoys the benefits and bears the risk, the lease is a capital lease.
• D)IFRS provides more general criteria for identifying the entity enjoying the rewards and incurring the risk.
• E)all of the above

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Definitions:

Quantity Standard

A specific measure established to gauge the expected or optimal quantity of input required to produce a unit of output.

Price Standard

A pre-determined cost per unit of input or output, used for setting budgets and measuring performance.

Variable Overhead Efficiency Variance

Variable overhead efficiency variance is a metric used to measure the difference between the expected (standard) and actual use of variable overhead resources in production.

Standard Machine-Hours

A predetermined measure of how much machine time is expected for a task, used in cost accounting.