[The following information applies to the questions displaye…

[The following information applies to the questions displayed below.] Accounting for leases is similar in most respects under U.S. GAAP or IFRS. The primary difference is that IFRS treats all leases as finance leases by the lessee. Knowledge Check 01 Which of the following statements about the classification and accounting for leases are true? Note: Select all that apply.

[The following information applies to the questions displaye…

[The following information applies to the questions displayed below.] When a lease is classified as a finance lease from the lessee’s perspective and a sales-type lease from the lessor’s perspective, (1) the lessee records a right-of-use asset and lease liability for the present value of the lease payments, and (2) the lessor records a lease receivable for the same amount and removes the asset from its books. The lessor recognizes interest revenue and the lessee recognizes interest expense at the effective rate times the outstanding balance. The lessee amortizes the right-of-use asset on a straight line basis. For an operating lease, the two components, interest and amortization, are shown as one lease expense in the income statement. Knowledge Check 01 Amortization of a right-of-use asset over the lease term is recorded by the:

[The following information applies to the questions displaye…

[The following information applies to the questions displayed below.] In an operating lease, a sale is not recorded by the lessor. Instead, the periodic lease payments are accounted for as rent revenue by the lessor. The lessee records a right-of-use asset and lease liability at the present value of the lease payments. Interest expense is recognized at the effective rate times the outstanding balance. Amortization of the right-of-use asset is determined as the amount needed to cause the total lease expense (interest plus amortization) to be a straight-line amount equal to the lease payment. Knowledge Check 01 Under an operating lease: Note: Select all that apply.