In determining if the risk and rewards of ownership have been transferred,AASB 117 states the following would indicate a finance lease is in effect:
A) Ownership of the assets transfers at the end of the lease term for a variable payment equal to its then fair value.
B) Contingent rents exist.
C) The lease is non-cancellable by the lessor.
D) All of the given answers are correct.

Question

Quizplus · Accepted Answer

AASB 117 outlines various indicators that a lease is a finance lease, including the transfer of ownership by the end of the lease term, even if the payment for the transfer is variable and based on the fair value at the time. Contingent rents and the non-cancellability of the lease by the lessor are not direct indicators of a finance lease under AASB 117. The key indicators of a finance lease involve the transfer of risks and rewards of ownership, which can include a purchase option at fair value but are not limited to the conditions described in options B and C. Therefore, the correct answer reflects a misunderstanding of AASB 117's provisions regarding finance leases.

In Determining If the Risk and Rewards of Ownership Have