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ELEC 4 - LEASE ACCOUNTING > C10 - LESSEE ACCOUNTING > Flashcards

C10 - LESSEE ACCOUNTING Flashcards

1
Q

Under IFRS 16, it is defined as a contract or part of a contract that conveys the right to use the underlying asset for a period of time in exchange for consideration.

A

Lease

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2
Q

Appendix B9 provides that to be a LEASE, a contract must convey the _________ of an identified asset.

A

right to control the use

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3
Q

A contract conveys the right to control the use of an asset if throughout the period of use, the customer has the right to: (OD)

A

a. Obtain substantially all of the economic benefits from the use of the identified asset. (economic benefits by using, holding, or subleasing the asset)
b. Direct use of the identified asset. (has the right to direct how and for what purpose the asset is used)

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4
Q

Finance Lease Model

Provides that at the commencement date, a lessee shall recognize a ______ and a _______.

A

a. right of use asset
b. lease liability

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5
Q

defined as an ASSET that represents the right of lessee to use an underlying asset over the lease term in a FINANCE LEASE.

A

Right of use Asset

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6
Q

Obligation to make payments

A

Lease Liability

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7
Q

True or False

All lease shall be accounted for by the lessee as a finance lease under the new lease standard.

A

True

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8
Q

is the subject of a lease for which the right to use that asset has been provided by the lessor to the lessee.

A

Underlying Asset

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9
Q

is the entity that obtains the right to use an underlying asset for a period of time in exchange for consideration.

A

Lessee

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10
Q

is the entity that provides the right to use an underlying asset for a period of time in exchange for consideration.

A

Lessor

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11
Q

True or False

A lessee is not permitted to make an accounting policy election to apply the operating lease accounting.

A

False

Lessee is permitted.

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12
Q

2 optional exemptions to apply Operating Lease Accounting and to NOT recognize an asset and lease liability:

A

a. Short-term lease
b. Low value asset

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13
Q

Under the operating lease model, the periodic rental is simply recognized as ______ on the part of the lessee.

A

Rent Expense

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14
Q

It is a lease that has a term of 12 months or less at the commencement date of the lease.

A

Short-term Lease

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15
Q

True or False

A lease that contains a PURCHASE OPTION is NOT a short-term lease.

A

True

Hindi siya short-term kasi there is a possibility na maging FINANCE LEASE if ineexercise yung purchase option.

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16
Q

It is a grouping of underlying assets of similar nature and use in an entity’s operations.

A

Class of underlying asset

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17
Q

True of False

Low value asset is a matter of PROFESSIONAL JUDGEMENT.

A

True

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18
Q

Low Value Asset

A lessee shall assess the value of an underlying asset based of the value of the asset __________ regardless of the age of the asset being leased.

A

when it is new

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19
Q

Examples of low value underlying assets:

A

a. Personal Computers
b. Office Furniture and Equipment

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20
Q

Low Value Lease

Provides that the election for low value lease is made on a ________ basis.

A

lease by lease

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21
Q

is defined as a lease that transfers SUBSTANTIALLY ALL of the RISKS and REWARDS incidental to ownership of an underlying asset.

A

Finance Lease

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22
Q

Finance Lease

The lessee shall measure the RIGHT OF USE ASSET at ____ at commencement date.

A

at COST

23
Q

Cost of Right of Use Asset comprises: (PLIC)

A

a. PV of Lease Payments/ Initial measurement of lease liability
b. Lease payments made to Lessor at or before commencement date (Lease Bonus, Lease Incentives)
c. Initial direct cost incurred by the lessee
d. Cost of dismantling, removing, and restoring the underlying asset

24
Q

are payments by the lessor to the lessee or the reimbursement or assumption by the lessor of the costs of the lessee. This should be deducted from the cost of right of use asset.

A

Lease Incentives

25
Q

Example of Lease Incentive

A

Commission paid by the lessee to a broker

26
Q

are incremental costs of obtaining a lease that would not have been incurred if the lease had not been obtained

A

Initial Direct Costs

27
Q

are not initial direct costs and NOT included in the cost of right of use asset.

A

Leasehold Improvements

28
Q

It is separately accounted for as PPE and depreciated over the SHORTER between the LEASE TERM and LIFE OF THE IMPROVEMENT

A

Leasehold Improvements

29
Q

Any ___ upon the lease expiration is accounted for as an asset by the lessee.

A

Security Deposit Refundable

30
Q

Subsequent measurement of right of use asset.

A

Cost Model

31
Q

To apply the cost model, the lessee shall measure the right of use asset at _______

A

Cost less any accumulated depreciation and impairment loss

32
Q

True or False

The carrying amount of the right of use asset is NOT adjusted for any remeasurement of the lease liability

A

FALSE

It is adjusted.

33
Q

Presentation of Right of use Asset

Lessee shall present the right of use asset as a _______ in the statement of financial position.

A

separate line item

34
Q

True or False

If a lessee applies FAIR VALUE MODEL in measuring investment property, the lessee shall also apply FVM to the right of use asset that meets the definition of investment property.

A

True

35
Q

True or False

If the right of use asset relates to a class of PPE to which lessee applies the REVALUATION MODEL, a lessee may NOT elect to apply the revaluation model to ALL of the right of use asset that relates to that class of PPE.

A

False

The lessee MAY elect revaluation model to all PPE related right of use asset.

36
Q

For the depreciation of right of use asset, the lessee shall apply _______.

A

normal depreciation policy

37
Q

The lessee shall depreciate the right of use asset over the USEFUL LIFE OF THE UNDERLYING ASSET under the following 2 conditions:

A

a. Lease transfers ownership of the underlying asset to the lessee at the end of lease term
b. Lessee is reasonably certain to exercise a purchase option.

38
Q

If there is no transfer of ownership to the lessor or if the purchase option is not reasonably certain to be exercised, the lessee shall depreciate the right of use asset over _____

A

shorter between Useful Life of Underlying Asset and the Lease Term.

39
Q

At the commencement date, the lessee shall measure the lease liability at _________

A

present value of lease payments

40
Q

Lease payments shall be discounted using ______

A

interest rate implicit in the lease

41
Q

If the implicit interest rate cannot be readily determined, the _____ of the lessee is used.

A

incremental borrowing rate

42
Q

The ___________ in the lease is the interest rate that causes the present value of the lease payments and the unguaranteed residual value to equal the fair value of the underlying asset and initial direct costs of the lessor.

A

interest rate implicit

43
Q

The lessee’s _____ is the rate of interest that the lessee would have to pay to borrow funds necessary to obtain a similar asset over a similar term and similar security.

A

incremental borrowing rate

44
Q

5 Components of Lease Payments (FVEAT)

A

a. Fixed lease payments
b. Variable lease payments
c. Exercise price of a purchase option if the lessee is reasonably certain
d. Amount expected to be payable by the lessee under a residual value guarantee
e. Termination penalties if the lease term reflects the exercise of a termination option

45
Q

are payments made by the lessee to the lessor for the right to use an underlying asset during the lease term

A

Fixed Payments

46
Q

are payments made by the lessee for the right to use the underlying asset during the lease term that vary because of changes in facts or circumstances occurring AFTER the commencement date other than passage of time.

A

Variable Payments

47
Q

True or False

Payments that are based on an index or interest rate are not included in the lease payments.

A

False

It is included in the lease payments.

48
Q

True or False

The lease liability is remeasured when the index or interest rate changes and the lease payments are revised.

A

True

49
Q

True or False

Payments that are made based on passage of time or future usage of the underlying asset are not included in lease payments.

A

True

50
Q

is the guarantee made to the lessor by a party unrelated to the lessor that the value of an underlying asset at the end of the lease term will be at least AT LEAST A SPECIFIED AMOUNT.

A

Residual Value

51
Q

is that portion of the residual value of the underlying asset, the realization of which by the lessor is not assured or is guaranteed solely by a partly related to the lessor

A

Unguaranteed Residual Value

52
Q

These are ownership expenses such as maintenance, taxes and insurance for the underlying asset. These costs are EXPENSED immediately when incurred.

A

Executory Costs

53
Q

It is a noncancelable period for which the lessee has the right to use the underlying asset.

A

Lease Term

ELEC 4 - LEASE ACCOUNTING (1 decks)

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