Which of the Following Statements Is Incorrect

question 22

Multiple Choice

Which of the following statements is incorrect?

• A) More onerous disclosure requirements are prescribed for finance leases than operating leases.
• B) Depreciation and interest expenses on finance leases may exceed rental payments and result in lower profits being reported in the early years of a finance lease.
• C) The capitalisation of a leased asset increases the value of reported non-current assets and increases the return on assets ratio.
• D) Depreciation and interest expenses relating to leases are not deductible for tax purposes, so additional liabilities may have to be recognised under IAS 12 Income Taxes when these expenses are less than the deduction for rental payments.

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Definitions:

Capitalism

An economic system where private individuals own capital goods, investments, and means of production, with the goal of making profits.

Market Economy

An economic system where supply and demand from consumers drive the production of goods and services, with minimal government intervention.

Supply And Demand

Basic economic concept that describes the balance between the availability of a product or service and the desire (demand) for it.

Free Enterprise System

An economic system where private businesses operate in competition, largely free of state control, with limited government intervention.