TRUE 1. IAS 17 requires lessees & lessors to disclose certain info.

About leases in their financial

statements or in the notes.
FALSE 2. The lessor will recover a greater net investment if the residual value is guaranteed instead of
unguaranteed.
TRUE 3. From the lessees viewpoint, an unguaranteed residual value is the same as no residual value in
terms of computing the minimum lease payments.
FALSE 4. Both guaranteed & an unguaranteed residual value affects the lessees computation of amounts
capitalized as a leased asset.
TRUE 5. When the lessee agrees to make up any deficiency below a stated amount that the lessor realizes
in residual value, that stated amount is the guaranteed residual value.

FALSE 6. In computing the annual lease payments, the lessor deducts only a guaranteed residual value
from the fair value of a leased asset.
FALSE 7. Under the operating method, the lessor records each rental receipt as part interest revenue and
part rental revenue.
TRUE 8. Direct-financing leases are in substance the financing of an asset purchase by the lessee.
TRUE 9. A benefit of leasing to the lessor is the return of the leased property at the end of the lease term.
TRUE 10. Leasing equipment reduces the risk of obsolescence to the lessee, and passes the risks of the
residual value to the lessor.
FALSE 11. A lease that contains a purchase option must be capitalized by the lessee.
TRUE 12. Executory costs should be excluded by the lessee in computing the present value of minimum
lease payments.
FALSE 13. A capitalized leased asset is always depreciated over the term of the lease by the lessee.
TRUE 14. IAS 17 doesnt provide detailed guidance for leases of natural resources, sale-leasebacks, and
leveraged leases.

1. MINIMUM LEASE
PAYMENTS
2. EXECUTORY COSTS
3. IMPLICIT INTEREST RATE
4. INCREMENTAL
BORROWING RATE
5. DIRECT FINANCING
LEASES
6. SALES-TYPE LEASE
7. INITIAL DIRECT COSTS
8. SALE LEASEBACK
the amounts required over the lease term plus any amount to be paid for the
residual value.
expenses to maintain leased property such as repairs ;taxes.
Interest rate that would discount the minimum lease payments to the fair market
value of the leased asset.
interest rate at which the lessee could borrow the amount of money necessary
to purchase the leased asset.
a lease in which the lessor is primarily engaged in fin. activities & views the
lease as an investment.
a lease in which the lessor is the manufacturer or dealer utilizing the lease to
facilitate the sale of goods
expenses such as commissions, legal fees and etc.
an arrangement in w/c the seller becomes seller-lessee & the purchaser is the
purchaser-lessor

FALSE 1. The IFRS leasing standard, IAS 17 is the subject of only three interpretations.

FALSE 2. IFRS requires a year-by-year breakout of payments related to leasing arrangements.

TRUE 3. In a lease that is appropriately recorded as a direct-financing lease by the lessor, the
unearned income should be amortized over the period of the lease using E.I.M.

TRUE 4. The amount to be recorded as the cost of an asset under capital lease is = to p.v of min.
lease payments or f.v of the asset, whichever is lower.

TRUE 5. In a ten-year capital lease, the portion of the annual lease payment in the leases third year
that represents interest is less than in the second year.

FALSE 6. Pyramid Properties entered a lease that contains a bargain purchase option.

TRUE 7. Both US GAAP & IAS 17 share the same objective of recording leases and lessors
according to their economic substance

TRUE 8. IAS 17 requires that lessees use the implicit rate to record a lease, unless it is impractical
to determine the lessees implicit rate.