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

Which of the following is a criterion for the classification of a lease as a finance lease under IFRS? (Select one answer.)

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

The asset is of a low value.

The lease term is less than 12 months.

The lessee has no option to purchase the asset at the end of the lease term.

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Verified step by step guidance

Understand the context: Under IFRS 16, a lease is classified as a finance lease if it transfers substantially all the risks and rewards of ownership of the underlying asset to the lessee. This is different from an operating lease, where such risks and rewards remain with the lessor.

Review the criteria for a finance lease: One of the key criteria is that ownership of the asset is transferred to the lessee by the end of the lease term. Other criteria include the lessee having a purchase option at a price lower than the fair value, the lease term covering the majority of the asset's useful life, or the present value of lease payments being substantially equal to the fair value of the asset.

Analyze the options provided: The first option states that ownership is transferred to the lessee by the end of the lease term, which aligns with one of the finance lease criteria under IFRS 16. The other options (low-value asset, lease term less than 12 months, no purchase option) do not meet the criteria for a finance lease.

Eliminate incorrect options: A low-value asset or a lease term of less than 12 months typically qualifies for a simplified treatment under IFRS 16 but does not classify the lease as a finance lease. Similarly, the absence of a purchase option does not meet the finance lease criteria.

Conclude: Based on the analysis, the correct answer is the option stating that the lease transfers ownership of the asset to the lessee by the end of the lease term, as this satisfies one of the key criteria for a finance lease under IFRS 16.