IFRS 16 Leases Deems Cancellable Leases with Which of the Following

question 13

Multiple Choice

IFRS 16 Leases deems cancellable leases with which of the following characteristics to be non-cancellable: $$\begin{array} { | l | l | l | l | l | } \hline&I&II&III&IV\\\hline \begin{array} { l } \text { Leases that can be cancelled upon the occurrence of } \\\text { some remate contingency }\end{array} & \text { No } & \text { Yes } & \text { Yes } & \text { Yes } \\\hline \begin{array} { l } \text { Leases that can be cancelled only with the permission of } \\\text { the lessor }\end{array} & \text { Yes } & \text { No } & \text { Yes } & \text { Yes } \\\hline \begin{array} { l } \text { Leases where the lessee, upon cancellation, is committed } \\\text { to enter into a further lease with the same lessor }\end{array} & \text { Yes } & \text { Yes } & \text { Yes } & \text { No } \\\hline \begin{array} { l } \text { Leases that require the lessee to pay a substantial penalty } \\\text { on cancellation }\end{array} & \text { Yes } & \text { Yes } & \text { Yes } & \text { No } \\\hline\end{array}$$

• A) I;
• B) II;
• C) III;
• D) IV.

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Definitions:

Sunk Cost

Expenses that have been paid and cannot be retrieved, and therefore, should not impact upcoming business strategies.

Opportunity Cost

The benefit foregone by choosing one alternative over another.

Financing Costs

Expenses incurred by an entity in borrowing funds, including interest, fees, and other charges associated with the issuance of debt.

Incremental Cash Flow

The additional cash flow generated by a company from a new project or investment, after accounting for expenses.