FA-FFA Module-4

1. Residual value is specifically:

2. Useful life of an asset refers to the life:

3. Spare parts and servicing equipment are usually accounted for as:

4. Individually-insignificant items, such as moulds, tools and dies may be:

5. Repairs and maintenance costs are normally:

6. If the costs of a major inspection (for example, aircraft) are capitalised:

7. Elements of cost are: (i) The purchase price (ii) Any costs directly attributable to bringing the asset to the location (iii) The initial estimate of the costs of dismantling, and removing the item (iv) Overheads of the purchasing department relating to the buy of the asset.

8. Directly attributable costs include: (i) staff costs arising directly from the construction, or acquisition, of the item of property, plant and equipment; (ii) site preparation costs; (iii) initial delivery and handling costs; (iv) costs of testing whether the asset is functioning properly, after deducting the net proceeds from any samples, or sundry income; and (v) professional fees. (vi) costs of opening a new facility; (vii) costs of introducing a new product, or service (including costs of advertising and promotional activities); (viii) costs of running a business in a new location, or with a new class of customer (including costs of staff training); and (ix) administration and other general overhead costs.

9. Recognition of costs (to be capitalised) ceases when:

10. The following costs should be accounted for as: (i) costs incurred while an item, capable of operating in the manner intended by management, has yet to be brought into use, or is operated at less than full capacity; (ii) initial operating losses, such as those incurred while demand for the item’s output builds up; and (iii) costs of relocating, or reorganising part, or all, of an undertaking’s operations.

11. Incidental income and expenses (such as using a site as a temporary car park) should be:

12. Internal profits generated, when creating a self-constructed asset, should be:

13. If payment for a fixed asset is deferred beyond normal credit terms, any additional payment above the cash cost of the asset will be accounted for as:

14. If one or more assets are exchanged for a new asset, the new asset is valued at:

15. In the case of an exchange of assets, if the acquired asset cannot be valued:

16. An undertaking can choose either the cost model or the revaluation model, as its accounting policy, it must apply the chosen model to:

17. Using the cost model, the asset in accounted for at:

18. Using the revaluation model, can fair values be estimated, if there is no market-based evidence?

19. Revaluations are required:

20. When an item is revalued, any accumulated depreciation at the date of the revaluation is treated in which of the following ways:

21. Examples of separate classes of fixed assets are: (i) land. (ii) land and buildings. (iii) machinery. (iv) ships. (v) aircraft. (vi) motor vehicles. (vii) furniture and fixtures. (viii) office equipment. (ix ) stationery

22. A class of assets may be revalued on a rolling basis, provided:

23. If an asset’s carrying amount is increased by revaluation, the increase is;

24. If an asset’s carrying amount is decreased by revaluation and there is no revaluation reserve, the decrease should be:

25. Transfers of amounts between Equity – Revaluation Reserve and retained earnings are allowed

26. Depreciation charges for a period are recorded:

27. Changes in the estimated useful life should:

28. The carrying value of your asset is $10. Its fair value is $12. Do you continue depreciation?

29. The carrying value of your asset equals the residual value. Do you continue to depreciate it?

30. Regular repair and maintenance preserves the value of your hotel. Do you continue to depreciate it?

31. Your asset has a residual value. Do you continue to depreciate it?

32. Depreciation can cease when an asset is idle.

33. In determining the useful life of an asset, consider: (i) Expected usage of the asset. (ii) Expected physical wear and tear. (iii) Technical, or commercial obsolescence. (iv) Legal, or similar, limits on the use of the asset. (v) Interest rates.

34. Land and buildings are separate assets, as:

35. You buy land and building. The land is revalued at double its cost. Do you continue to depreciate the building?

36. If your land is leased under a finance lease, do you depreciate it?

37. A variety of depreciation methods can be used. These methods include the straight-line method, the diminishing balance method and the units of production method. The choice of depreciation method is governed by:

38. Compensation from third parties for items impaired, lost or sequestrated should be recorded as income:

39. The carrying amount of an item of PPE will be derecognised:

40. A gain on the sale of an asset should be recorded as:

41. The gain, or loss, arising on the sale of an asset is:

42. Which of the following items qualifies as property, plant and equipment?

43. The “carrying amount” of an item of property, plant and equipment generally refers to:

44. A company pays £40,000 to replace a major component of a factory machine. The faulty component that is replaced is sold for £2,000. The carrying amount of the machine just before this replacement occurs is £450,000, of which £10,000 relates to the faulty component that is being replaced. The revised carrying amount of the machine after the replacement occurs and the profit or loss on disposal of the faulty component are:

45. Which of the following would not be included in the cost of an item of property, plant and equipment?

47. Depreciation is defined as the fall in value of an asset during an accounting period. True or False?

48. On 1 January 2015, a company which prepares financial statements to 31 December each year buys an item of equipment for £20,000. Useful life is estimated to be six years and residual value is expected to be approximately £1,500.
The company uses the diminishing balance method of depreciation at a rate of 35% per annum.
To the nearest pound, the depreciation of this item for the year to 31 December 2016 would be:

49. Borrowing costs that are directly attributable to the acquisition of a qualifying asset must be capitalised as part of the cost of that asset. True or False?

50. A company has the following general borrowings outstanding throughout the whole of an accounting year:
6.5% Bank loan of £400,000
8% Bank loan of £800,000
If a qualifying asset costing £50,000 is funded out of these general borrowings, the capitalisation rate that should be used is:

51. If investment property is measured using the fair value model, a gain arising from a change in the fair value of an investment property must be:

52. If a company adopts the revaluation method in relation to an item of property, plant and equipment, it is no longer necessary to charge depreciation in relation to that item. True or False?

53. On 1 January 2015, a company which prepares financial statements to 31 December acquires an item of equipment and receives a government grant of 20% of the item’s cost. The item cost £30,000 and has an expected useful life of seven years with a residual value of approximately £4,000.
The item is depreciated on the diminishing balance basis at a rate of 25% per annum.
The amount of the grant that should be recognised as income in the year to 31 December 2016 is:

54. In accordance with IAS 36 Impairment of Assets, which one of the following statements is correct?

55. In accordance with IAS 36 Impairment of Assets, which one of the following statements could be an indicator that an asset may be impaired?

56. In accordance with IAS 36 Impairment of Assets, which one of the following situations is most likely to be an impairment indicator?

57. The IAS 36 Impairment of Assets impairment test for an individual asset requires that the carrying amount of the asset be compared with its recoverable amount. According to IAS 36, ‘recoverable amount’ is described as the higher of two items.

Which of the following items are included in the definition of recoverable amount? Select which one of the following options is correct.

58. Roller Ltd (Roller) is testing an asset for impairment. The carrying amount of the asset is $85 000. The following data has been obtained by Roller in relation to the asset.

• Future cash flows expected to be derived from the asset, $100 000.
• Estimated fair value of the asset, $80 000.
• Present value of future cash flows expected to be derived from the asset, $60 000.
• Costs of disposal for the asset, $2000.

In accordance with IAS 36 Impairment of Assets, what is the recoverable amount of the asset? Select which one of the following is correct.

59. The accountant for a manufacturing company is determining the value in use of an item of equipment. In accordance with IAS 36 Impairment of Assets, which one of the following items should be included in the determination of the equipment’s value in use?

63. The following information relates to three cash generating units.

In accordance with IAS 36 Impairment of Assets, what is the amount (to the nearest thousand) of the impairment loss that would be allocated to the corporate asset (building)?

Select which one of the following is correct.

64. In accordance with IAS 36 Impairment of Assets, how should an impairment loss for a cash generating unit (CGU) that includes goodwill be allocated?

Select which one of the following is correct.

66. In accordance with IAS 36 Impairment of Assets, when determining the fair value of an asset less costs of disposal or its value in use, which one of the following statements is correct?

67. In accordance with IAS 36 Impairment of Assets, when identifying a cash-generating unit (CGU), which one of the following statements is correct?

68. The following statements have been made in relation to the impairment of cash generating units (CGUs) and corporate assets. Select which two of the following are correct.

69. Your asset is impaired: its ‘fair value less costs to sell’ = loss of $4k and its ‘value in use’ = $6k. Which value do you use?

70. Your asset is impaired: its ‘fair value less costs to sell’ = loss of $4k and its ‘value in use’ = loss of $2k. Which value do you use?

71. The carrying value of your cash-generating unit = Assets $10m + Goodwill $3m And Its ‘value in use’ = $11m You should:

72. For impairment testing a cash-generating unit is

73. Costs of disposal are:

74. An asset is impaired if:

75. Goodwill should be tested for impairment

76. Value-in-use is

77. IAS 36 applies to which of the following assets

78. If the fair value less costs to sell cannot be determined

79. Carrying amount is the amount at which an asset is recognised __________.

80. Which of the following terms does this statement define: “the amount by which the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount”?

81. Which of the following statements do agree with IAS 36?

82. The existence of which of the following in the entity’s internal reporting does indicate that an asset may be impaired?

83. Which of the following is not an external indication of impairment?

84. An impairment loss is:

85. Which of the following is not an external indication of impairment?

86. An asset’s recoverable amount is equal to:

87. An asset’s carrying amount is £25,000. Its fair value less costs of disposal is £15,000 and its value in use is £19,000. There is an impairment loss of:

88. How often should goodwill acquired in a business combination be tested for impairment?

89. The IAS36 definition of “corporate assets” specifically excludes goodwill. True or False?

90. The carrying amount of a CGU is £900,000. This consists of goodwill £250,000 and property, plant and equipment £650,000. The CGU has a recoverable amount of only £520,000. How is the impairment loss allocated between the assets of the CGU?

91. An asset is expected to generate cash inflows of £20,000 per annum for each of the next three years and then to be scrapped. These cash inflows will occur at the end of each year. The asset will generate no cash outflows. Using a discounting rate of 10% per annum, what is the asset’s value in use?

92. Which of the following is not an internal indication of the fact that an impairment loss has now decreased or no longer exists?

93. A previously-recognised impairment loss relating to goodwill should be reversed if there is evidence that the loss no longer exists. True or False?

94. The carrying amount of a CGU is £525,000. This consists of goodwill £75,000, development costs £150,000 and property, plant and equipment £300,000. The CGU has a recoverable amount of £330,000.

What is the carrying amount of the property, plant and equipment after the impairment loss has been allocated?

95. An asset has a carrying amount of £22,500 and is expected to yield cash flows of £8,000 per annum for the next three years. The asset’s fair value less costs of disposal is £17,200.

Assuming that all cash flows occur at the end of the year concerned and that the appropriate discount rate is 7%, the amount of the impairment loss is:

96. Self-Starter Sports Ltd (Self-Starter Sports) internally developed several assets. Which one of the following internally generated assets should be recognised in accordance with IAS 38 Intangible Assets? Assume that the expected future economic  benefits  of the internally  generated  assets are probable and the cost of the asset can be measured reliably.

97. A newly set up dot-com entity has engaged you as its financial advisor. The entity has recently completed one of its highly publicized research and development projects and seeks your advice on the accuracy of the following statements made by one of its stakeholders. Which one is it?

98. Which item listed below does not qualify as an intangible asset?

99. Which of the following items qualify as an intangible asset under IAS 38?

100. Once recognized, intangible assets can be carried at:

101. Which of the following disclosures is not required by IAS 38?

102. The definition of an intangible asset comprises: (i) Identifiability (ii) Control over a resource (iii) Existence of future benefits (iv) Residual value

103. An undertaking can choose either the cost option or the revaluation option, as its accounting policy. It must apply the chosen model to:

104. Using the revaluation option, can fair values be estimated, if there is no market-based evidence?

105. Control is:

106. Research costs can be capitalised:

107. Which of the following assets is not an intangible asset?

108. Which of the following statements, relating to intangible assets is / are correct?

1.  Research on market potential, prior to launching a product, can be capitalised
2.  Applied research, calculated to achieve a stated aim, can be capitalised.
3.  An asset should never be capitalised if it has no physical existence
4. A resource, though intangible, may be capitalised, if it qualifies to be capitalised if it is identifiable and meets the capitalisation criteria

109. Which of the following qualities should an asset possess for it to qualify for recognition as an asset?

1.  It should have physical existence
2.  It should be within the entity’s control
3.  It should always be separable i.e. realizable without selling the whole business
4. There should be a probability of future economic benefit from it

110. Which of the following intangibles is the only one which may be capitalised, at least initially, though (i) it is not separable (ii) there is no active market in it and (iii) flow of economic benefit from it is not probable

111. A company paid £10 million to acquire a reputed brand name. Although there is no active market in that asset it is permitted to report the brand name as an asset for which two of the following reasons?

1.  It was so very expensive to acquire
2.  Its cost has been established by a market transaction
3.  It is a name of such high market reputation
4.  Future economic benefits from it are probable because otherwise it would not have been acquired at such a cost.

112. Which of the following intangibles is/ are prohibited from being recognised as an asset?

1.  Home grown goodwill
2.  Separately acquired intangible
3.  Internally generated intangibles
4.  Goodwill acquired as part of an on-going business

113. For which one or more of the following reasons is the recognition as an asset of an internally generated intangible prohibited?

1.  Because there may not be an active market for that asset
2.  Because its cost is usually relatively insignificant
3.  Because it is difficult to reliably identify the related costs
4. Because it is difficult to establish the probability of flow of economic benefits

114. Which one or more of the following is /are essential for recognising an intangible asset (other than goodwill) when a business is acquired as a going concern?

1.  There is a probability that future economic benefits would arise from it
2.  It should have been reported as an asset by the business acquired.
3.  Its value should have been stated on the agreement for buying the business
4. There should be a reliable basis for valuing it

115. Which of the following expenses should be capitalised?

116. A company is searching for a white board marker the writings of which, instead of being rubbed off, may be blown out when lecturers breathe on them from a distance. Which of the following expenses incurred by the company qualifies to be classified as development cost?

117. Which of the following need to be established before development costs are capitalised?

1.  A customer should have ordered the development of the product
2.  The cost of the product should be reliably identified
3.  The business should have all necessary resources to complete the project
4.  The business should be committed to completing the development

118. If a development projects meets with all the conditions stipulated in IAS 38, the requirement of the standard is that the costs of that project?

119. Which of the following are valid reasons for capitalising development costs?

1.  For properly matching the cost of a development with benefits arising there from
2.  To ensure that resources available for generating income are fully reported
3.  Otherwise there will be reluctance to develop new projects
4.  Otherwise there would be an anomaly between developed asset and purchased one

120. Which of the following are reasons for writing off research & development costs as expenses?

1.  Poor co-relation between costs and delayed flow of economic benefit
2.  It may not always be probable that there will be a flow of future economic benefit
3.  To keep the cost of development a secret from rival companies
4.  Otherwise the liquidity of the company could be at peril.

121. The cost of goodwill purchased as part of an acquisition of an on going business shall be?

122. Intangible assets, other than goodwill, acquired as part of an on-going business or acquired separately:

1.  Should be never amortised
2.  Should be amortised systematically over its estimated useful life
3.  Should be written off over not more than five years
4.  Should be reviewed for impairment if their useful life is regarded as indefinite.

123. Which of the following statements with regard to accounting for goodwill and other intangibles is not correct?

124. Subsequent expenditure on brands, mastheads, publishing titles, customer lists and similar items must always be recognised in profit or loss as incurred.

125. Purchased goodwill is shown in the statement of financial position because it has been paid for. It has no tangible substance, and so it is an intangible non-current asset. It is dealt with under:

126. Sandy Ltd (Sandy) measures its investment in Blue Chip Ltd (Blue Chip) shares  at fair value. Blue Chip shares are listed and actively traded on the stock exchange. Which one of the following valuations should Sandy use to measure its investment in shares in Blue Chip in its financial statements at 30 June 20X3?

129. Cayenne Ltd (Cayenne) purchases a property on 1 July 20X0 for $100 000. It sells the  property on 1 January 20X3 to Snow Ltd (Snow) in exchange for 10 000 shares in Snow. On that date, Snow’s share price is $11 and the fair value of the property is $108 000.

Which one of the following statements is correct?

130. Which one of the following is a criticism of IAS 40 Investment Property?

131. Investment property can be held by: The owner   B. A lessor, under a finance lease   C. A lessee, under a finance lease

132. A property that is held by a lessee, under an operating lease, may be held as an investment property, but only if:

133. If property held under an operating lease is classified as investment property:

134. If a property is partly an investment property, and partly owner-occupied, the firm should account for the property:

135. If a firm provides significant ancillary services to tenants in its property:

136. A parent company leases a property to its subsidiary. It may be classified as an investment property in the:

137. Repairs and maintenance costs are normally:

138. If the costs of a major repair (for example, replacement of walls) are capitalised:

139. Elements of cost of an investment are:<br> 1. Its purchase price 2. Legal costs 3. Property transfers taxes 4. Overheads of the property department relating to the purchase of the asset

140. If payment for an investment property is deferred beyond normal credit terms, any additional payment above the cash cost of the asset will be accounted for as:

141. The cost of a property interest held under a lease should be valued at:

142. If one or more assets are exchanged for a new asset, the new asset is valued at:

143. In the case of an exchange of assets, if the acquired asset cannot be valued:

144. An undertaking can choose either the cost model or the revaluation model, as its accounting policy for investment property. It must apply the chosen model to:

145. A gain arising from a change in the fair value of investment property should be recorded:

146. Fair value accounts for future capital expenditure that will improve the property:

147. Using the cost model, the asset in accounted for at:

148. When an undertaking decides to dispose of an investment property without development:

149. If an undertaking begins to redevelop an existing investment property for continued use as investment property:

150. When an undertaking uses the cost model, transfers between investment property, owner-occupied property and inventories:

151. For a transfer from investment property, carried at fair value, to owner-occupied property or inventories, the property’s cost for subsequent accounting is:

152. For a transfer from inventories to investment property that will be carried at fair value, any difference between the fair value of the property at that date and its previous carrying amount is:

153. When an undertaking completes the construction, or development, of a self-built investment property that will be carried at fair value, any difference between the fair value of the property at that date, and its previous carrying amount:

154. Compensation from third parties for items impaired, lost or sequestrated should be recorded as income:

155. The carrying amount of an item is derecognised (written out of the balance sheet/statement of financial position):

156. The gain, or loss, arising on the sale of an asset is:

157. IFRS 5 covers: 1. The classification, measurement and presentation of assets ‘held for sale’ 2. The classification and presentation of discontinued operations 3. The impairment of long-lived assets to be held and used

158. A disposal group, which was part of a cash-generating unit:

159. A firm purchase commitment is an agreement, binding on both parties, that: 1. Specifies all significant terms, including the price and timing of the transactions 2. Includes a disincentive for non-performance, which is sufficiently large to make performance highly probable 3. Is with an unrelated party

160. Recoverable amount is an asset’s:

161. For an asset to be held for sale,: 1. It must be available for immediate sale in its present condition 2. Its sale must be highly probable 3. The management must be committed to a plan to sell the asset 4. The management must have an active programme to locate a buyer 5. The asset must be actively marketed for sale 6. The sale should be expected to be completed within one year from the date of classification 7. The asset should be fully depreciated

162. If the criteria are met after the end of reporting period, an undertaking shall:

163. If a newly acquired asset is ‘held for sale’, the asset or disposal group will be measured at:

164. If the asset or disposal group is acquired as part of a business combination, it shall be measured at:

165. Subsequent re-measurement: Provisions for obsolete inventory and doubtful debts should be reviewed:

166. An adjustment, to the carrying amount of a non-current asset that ceases to be classified as ‘held for sale’, is recorded in:

167. As at 30 September 2013 Dune’s property in its statement of financial position was:

Property at cost (useful life 15 years) $45 million

Accumulated depreciation $6 million

On 1 April 2014, Dune decided to sell the property. The property is being marketed by a property agent at a price of $42 million, which was considered a reasonably achievable price at that date. The expected costs to sell have been agreed at $1 million. Recent market transactions suggest that actual selling prices achieved for this type of property in the current market conditions are 10% less than the price at which they are marketed.

At 30 September 2014 the property has not been sold.

At what amount should the property be reported in Dune’s statement of financial position as at 30 September 2014?

168. Non-current assets that meet the criteria are presented separately on the Statement of Financial Position within current assets

169. Discontinued operations and operations held for sale shall not be disclosed separately in the statement of financial position at the lower of their carrying value less costs to sell.

170. If a component is not itself a separate major line of business or geographical area of operations then it must be “part of a single co-ordinated plan” to dispose of such a line of business or geographical area of operations. The single plan might relate to:

171. Whilst a non-current asset/disposal group is classified as held for sale it should not be depreciated or amortised.

172. An entity shall apply IFRS 16 to all leases, except leases of right-of-use assets in a sublease.

173. A contract is, or contains, a lease if the contract conveys the right __________ an identified asset for a period of time in exchange for consideration.

174. Which of the following shall a lessee recognise at the commencement date?

175. At the commencement date, a lessee shall measure the right-of-use asset at __________.

176. Which of the following situations would normally lead to a lease being classified as a finance lease?

177. A lease of land which does not transfer legal title to the lessee by the end of the lease term cannot be a finance lease. True or False?

178. In relation to operating leases, which of the following statements is not true?

179. At the commencement of a finance lease, IAS17 requires that the lessee should recognise both an asset and a liability to the lessor. These should be measured at:

180. The total finance charge arising in relation to a finance lease is equal to:

181. On 1 January 2015, a company which prepares financial statements to 31 December each year acquires a machine on a finance lease. The fair value of the machine on 1 January 2015 is £50,000 and the company is required to make three lease payments of £19,753 each. These payments fall due on 31 December 2015, 2016 and 2017. The rate of interest implicit in the lease is 9% per annum.

Calculate the finance charge which should be shown in the company’s financial statements for the year to 31 December 2015 if the total finance charge is allocated to accounting periods using the level spread method.

182. On 1 January 2015, a company which prepares financial statements to 31 December each year acquires a machine on a finance lease. The fair value of the machine on 1 January 2015 is £50,000 and the company is required to make three lease payments of £19,753 each. These payments fall due on 31 December 2015, 2016 and 2017. The rate of interest implicit in the lease is 9% per annum.

Calculate the finance charge which should be shown in the company’s financial statements for the year to 31 December 2015 if the total finance charge is allocated to accounting periods using the sum of digits method.

183. On 1 January 2015, a company which prepares financial statements to 31 December each year acquires a machine on a finance lease. The fair value of the machine on 1 January 2015 is £50,000 and the company is required to make three lease payments of £19,753 each. These payments fall due on 31 December 2015, 2016 and 2017. The rate of interest implicit in the lease is 9% per annum.

Calculate the finance charge which should be shown in the company’s financial statements for the year to 31 December 2015 if the total finance charge is allocated to accounting periods using the actuarial method.

184. On 1 January 2015, a company which prepares financial statements to 31 December each year acquires a machine on a finance lease. The fair value of the machine on 1 January 2015 is £50,000 and the company is required to make three lease payments of £19,753 each. These payments fall due on 31 December 2015, 2016 and 2017. The rate of interest implicit in the lease is 9% per annum.

Assuming that the total finance charge is allocated to accounting periods using the actuarial method, calculate the liability to the lessor at 31 December 2015 and show how this should be split between current and non-current liabilities.

185. In the case of a finance lease, the statement of financial position of the lessor shows the leased item as an asset so long as legal title to the item is not transferred to the lessee. True or False?

186. On 1 January 2016, a company entered into a finance lease to acquire an item of equipment and made its first annual payment of £50,000. The fair value of the item on 1 January 2016 was £215,000 and the interest rate implicit in the lease was 8% per annum. On 1 July 2016, the company also made a payment of £12,000 for a one-year lease of a machine, starting on that date. This lease is an operating lease. Ignoring depreciation, calculate the amount that should be recognised as an expense in the year to 31 December 2016 in relation to these two leases.

187. On 1 November 2015, a company entered into a finance lease to acquire a machine and made its first annual payment of £30,000. Three further payments of £30,000 are due on 1 November 2016, 2017 and 2018. The fair value of the machine on 1 November 2015 was £110,000 and the interest rate implicit in the lease is 6% per annum. Calculate the current liability relating to this lease that should be recognised in the company’s financial statements for the year to 31 October 2016.

188. On 1 October 20X4, Flash Co acquired an item of plant under a five-year lease agreement. The plant had a cash purchase cost of $25m. The agreement had an implicit finance cost of 10% per annum and required an immediate deposit of $2m and annual rentals of $6m paid on 30 September each year for five years. What is the current liability for the leased plant in Flash Co’s statement of financial position as at 30 September 20X5?

189. The requirements of IFRS 16 will have significant impacts on key accounting ratios of:

190. The greater recognition of leased assets and lease liabilities on the statement of financial position will:

191. If the fair value of the consideration for the sale of an asset does not equal the fair value of the asset, or if the payments for the lease are not at market rates, an entity shall make the following adjustments to measure the sale proceeds at fair value: I. Any below-market terms shall be accounted for as a prepayment of lease payments; and II. Any above-market terms shall be accounted for as additional financing provided by the buyer-lessor to the seller-lessee.

192. If the transaction does constitute a ‘sale’ under IFRS 15 then the seller-lessee shall recognise only the amount of any gain or loss that relates to the rights transferred to the buyer-lessor.

193. If the transaction does constitute a ‘sale’ under IFRS 15 then the buyer-lessor shall account for the purchase of the asset applying applicable Standards, and for the lease applying the lessor accounting requirements in IFRS 16

194. A short-term lease is a lease that, at the date of commencement, has a term of:

195. A lease that contains a purchase option _______ be a short-term lease

196. Lessees can elect to treat short-term leases by recognising the lease rentals as an expense over the lease term rather than recognizing:

197. Variable lease payments are the payments that depend on an index or a rate are included in the initial measurement of the lease liability and are initially measured using the index or rate as at the commencement date.

198. Variable lease payments that are not included in the measurement of the lease liability are recognised in profit or loss unless the costs are included in the carrying amount of another asset under another Standard.

199. The lease liability is initially measured at the present value of the lease payments payable over the lease term, discounted at:

200. The right-of-use asset is initially measured at:

201. The lease liability is effectively treated as a financial liability which is measured at___________, using the rate of interest implicit in the lease as the effective interest rate.