Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

A finance lease is a long-term lease which meets one or more of the following criteria. Which of the following is NOT a criterion for classifying a lease as a finance lease under IFRS?

The present value of lease payments amounts to substantially all of the fair value of the leased asset.

The lease allows the lessee to terminate the lease at any time without penalty.

The lease transfers ownership of the asset to the lessee by the end of the lease term.

The lease term covers the major part of the asset's economic life.

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Verified step by step guidance

Step 1: Understand the concept of a finance lease under IFRS. A finance lease is a lease that transfers substantially all the risks and rewards of ownership of an asset to the lessee. It is treated as if the lessee owns the asset for accounting purposes.

Step 2: Review the criteria for classifying a lease as a finance lease under IFRS. These criteria include: (a) the lease transfers ownership of the asset to the lessee by the end of the lease term, (b) the lease term covers the major part of the asset's economic life, and (c) the present value of lease payments amounts to substantially all of the fair value of the leased asset.

Step 3: Analyze the options provided in the problem. The first three options align with the criteria for a finance lease under IFRS, as they involve ownership transfer, lease term covering the asset's economic life, and lease payments approximating the asset's fair value.

Step 4: Identify the option that does NOT meet the criteria for a finance lease. The option stating 'The lease allows the lessee to terminate the lease at any time without penalty' does not align with the definition of a finance lease under IFRS, as it does not indicate a transfer of risks and rewards of ownership.

Step 5: Conclude that the correct answer is the option that does not meet the criteria for a finance lease under IFRS, which is 'The lease allows the lessee to terminate the lease at any time without penalty.'