US CMA Part 1 · Chapter 1 · Question 16 of 23
Which statement correctly describes lessee accounting under IFRS 16 compared with US GAAP (ASC 842)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) IFRS 16 applies a single lessee model in which most leases produce depreciation and interest expense, whereas ASC 842 classifies lessee leases as finance or operating
Explanation
Under IFRS 16 a lessee recognizes a right-of-use asset and lease liability for most leases and then depreciates the asset and accrues interest on the liability. Under ASC 842 a lessee also recognizes both on the balance sheet, but classifies each lease as finance (depreciation plus interest) or operating (single straight-line lease cost).
More External Financial Reporting Decisions MCQs
- Q18A company faces a lawsuit that it will probably lose. Its lawyers estimate the loss at between $200,000 and $600,000, with no amount in…
- Q19Under US GAAP, where are cash dividends paid to the company's own shareholders reported in the statement of cash flows?
- Q20Harbor Tech estimates uncollectible accounts using an aging schedule: Current: $300,000 at 1% 31-60 days: $80,000 at 5% Over 60 days…
- Q21Under US GAAP, how are unrealized holding gains on debt securities classified as available-for-sale reported?
- Q22The International Integrated Reporting Framework describes six capitals that an organization uses and affects. Which of the following is…