CAF-6 · Chapter 3 · Question 3 of 15
A lessee acquires a machine with a 4-year lease term. The machine has a 6-year useful life. There is no transfer of ownership or purchase option at the end of the term. Over what period should the right-of-use asset be depreciated?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) 4 years
Explanation
If the lease does not transfer ownership and there is no purchase option, the asset is depreciated over the shorter of the useful life and the lease term. Here, 4 years is shorter than 6 years.
More IFRS 16 Leases MCQs
- Q5A company leases a high-end laptop for 10 months at a cost of Rs. 8,000 per month. There is no purchase option. How can the company choose…
- Q6Under IFRS 16, which of the following items is EXCLUDED from the initial measurement of a lease liability?
- Q7A lessor classifies a lease as a finance lease if:
- Q8Nova Motors (a dealer) leases a car to a client. The car's cost is Rs. 2M, its fair value is Rs. 2.5M, and the PV of lease payments is Rs…
- Q9Where should a lessee present the interest expense on a lease liability in the Statement of Comprehensive Income?