CAF-6 · Chapter 3 · Question 1 of 15
Zenith Ltd enters into a contract for the use of a specialized generator. The supplier has the practical ability to substitute the generator throughout the period of use and would economically benefit from doing so. Is this a lease under IFRS 16?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) No, because the supplier has a substantive right of substitution.
Explanation
An asset is not considered identified if the supplier has a substantive right of substitution. This exists when the supplier can practically replace the asset and would benefit economically from doing so.
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