FR B Leases under IFRS 16 in detail

Under IFRS 16 a lessee first measures the lease liability at:

• 1 The fair value of the leased asset
• 2 The first year's payment only
• 3 The present value of the lease payments not yet paid
• 4 The total of all the lease payments

Which rate is used first to discount the lease payments?

• 1 The lessee's return on equity
• 2 The inflation rate
• 3 The rate implicit in the lease
• 4 The bank base rate

A lessee leases equipment for 3 years with payments of $10,000 a year in arrears. The annuity factor at 8 percent is 2.5771. The right-of-use asset at the start is, ignoring other costs:

• 1 $10,000
• 2 $27,771
• 3 $30,000
• 4 $25,771

A right-of-use asset is normally depreciated over:

• 1 Always the lease term
• 2 The shorter of the lease term and its useful life
• 3 Always its useful life
• 4 Ten years

Which lease may a lessee choose not to capitalise?

• 1 A five year lease of a building
• 2 A lease of 12 months or less without a purchase right
• 3 A three year lease of a vehicle
• 4 Any lease with fixed payments

At the end of year 1 a lease liability is $66,242. Interest for year 2 will be $5,299 and the year 2 payment is $20,000. The current liability at the end of year 1 is:

• 1 $14,701
• 2 $5,299
• 3 $20,000
• 4 $66,242

Variable lease payments that depend on a percentage of the lessee's sales are:

• 1 Ignored completely
• 2 Included in the lease liability
• 3 Expensed as they arise and left out of the liability
• 4 Added to the right-of-use asset

For a capitalised lease the lessee's statement of profit or loss shows:

• 1 A finance cost only
• 2 Nothing until the lease ends
• 3 Depreciation and a finance cost
• 4 A single operating lease rental

Initial direct costs paid by the lessee at the start of a lease are:

• 1 Added to the cost of the right-of-use asset
• 2 Added to the lease liability
• 3 Deducted from the lease liability
• 4 Expensed immediately

Compared with the old treatment of operating leases, IFRS 16 usually makes a lessee's gearing:

• 1 Zero
• 2 Lower
• 3 Higher
• 4 The same