30 Lecture

1. Which type of lease requires the recognition of the leased asset and associated liability on the balance sheet of the lessee? a) Operating lease b) Finance lease c) Both a and b d) None of the above Answer: b

2. How are lease incentives recognized under IAS 17? a) As an expense in the income statement b) As a reduction in lease payments and amortized over the lease term c) As a gain on the income statement d) None of the above Answer: b

3. How are subleases accounted for under IAS 17? a) As an expense in the income statement b) As a reduction in lease payments and amortized over the lease term c) In the same way as the original lease d) None of the above Answer: c

4. Which type of leaseback transaction can result in a gain recognized in the income statement? a) Finance lease b) Operating lease c) Both a and b d) None of the above Answer: b

5. What are the disclosure requirements for finance leases under IAS 17? a) Future minimum lease payments b) Contingent rent payments c) General description of lease terms d) All of the above Answer: d

Provisions, Contingent assets and Contingent Liabilities - IAS 37

6. When is a provision recognized under IAS 37? a) When there is a possible obligation or benefit that depends on future events b) When there is a present obligation as a result of a past event c) When there is a contingent asset d) None of the above Answer: b

7. What are the disclosure requirements for provisions under IAS 37? a) Nature of the obligation b) Amount of the provision c) Uncertainties surrounding the obligation d) All of the above Answer: d

8. How are contingent assets recognized under IAS 37? a) As a gain on the income statement b) As an asset on the balance sheet c) Only when the inflow of economic benefits is virtually certain d) None of the above Answer: c

9. What is the probability threshold for recognizing a contingent liability under IAS 37? a) Reasonably possible b) Probable c) Virtually certain d) None of the above Answer: b

10. How are contingent liabilities disclosed under IAS 37? a) Nature of the contingency b) Estimate of the financial effect c) Probability of the contingency occurring d) All of the above Answer: d

1. What is the difference between a finance lease and an operating lease? Answer: A finance lease transfers the risks and rewards of ownership to the lessee, while an operating lease does not.

2. What are the criteria for classifying a lease as a finance lease? Answer: A lease is classified as a finance lease if it transfers the risks and rewards of ownership to the lessee, and if it meets one or more of the following criteria: (1) the lease term is for the majority of the asset's useful life, (2) the present value of the lease payments is substantially all of the fair value of the asset, or (3) the asset is of a specialized nature that only the lessee can use.

3. How are lease payments allocated between the lease liability and the interest expense under a finance lease? Answer: Lease payments are allocated between the lease liability and the interest expense based on the effective interest rate of the lease.

4. What is the difference between a provision and a contingent liability? Answer: A provision is a present obligation arising from a past event, while a contingent liability is a possible obligation that depends on the occurrence of a future event.

5. How are provisions measured under IAS 37? Answer: Provisions are measured at the best estimate of the expenditure required to settle the obligation, taking into account any risks and uncertainties.

6. What is the difference between a contingent asset and a provision? Answer: A contingent asset is a possible asset that depends on the occurrence of a future event, while a provision is a present obligation arising from a past event.

7. How are contingent liabilities disclosed in the financial statements? Answer: Contingent liabilities are disclosed in the notes to the financial statements, including a description of the nature of the contingency, an estimate of the financial effect, and the probability of the contingency occurring.

8. What is the difference between a firm commitment and a contingent liability? Answer: A firm commitment is a binding agreement to purchase or sell goods or services, while a contingent liability is a possible obligation that depends on the occurrence of a future event.

9. How are contingent assets recognized in the financial statements? Answer: Contingent assets are recognized in the financial statements only when the inflow of economic benefits is virtually certain.

10. What is the difference between a warranty provision and a restructuring provision? Answer: A warranty provision is a provision for future warranty claims, while a restructuring provision is a provision for the costs of restructuring the business.

Leasing under IAS 17 requires a lessee to recognize assets and liabilities arising from a lease in their financial statements. The classification of a lease as either an operating lease or a finance lease depends on whether the risks and rewards of ownership are transferred to the lessee. The criteria for classifying a lease as a finance lease include the transfer of ownership, the lease term, the present value of lease payments, and the nature of the asset. Lease payments under a finance lease are allocated between the lease liability and interest expense based on the effective interest rate. IAS 37 deals with provisions, contingent assets, and contingent liabilities. Provisions are recognized when there is a present obligation arising from a past event, and it is probable that an outflow of resources will be required to settle the obligation. Provisions are measured at the best estimate of the expenditure required to settle the obligation, taking into account any risks and uncertainties. Contingent liabilities are possible obligations that depend on the occurrence of a future event. They are only disclosed in the financial statements when the likelihood of an outflow of resources is probable, and the amount of the obligation can be estimated reliably. Contingent assets are possible assets that depend on the occurrence of a future event. They are recognized in the financial statements when the inflow of economic benefits is virtually certain. Warranty provisions are recognized for future warranty claims, while restructuring provisions are recognized for the costs of restructuring the business. Provisions, contingent assets, and contingent liabilities require careful consideration and judgment when preparing financial statements in accordance with IAS 37. Adequate disclosure is essential to enable users of financial statements to understand the nature and extent of these items.