Which of the following indicators relating to lease capitalization is an example of IFRS criteria being more principles-based than GAAP with respect to lease accounting?
A)The title must transfer to the lessee at the end of the lease term.
B)The present value of the payments must be at least 90% of the fair value of the asset.
C)The lease term must be a major part of the economic life of the asset.
D)The lease agreement must contain a bargain purchase option.

Question

Quizplus · Accepted Answer

The criteria that the lease term must be a major part of the economic life of the asset is an example of IFRS criteria being more principles-based than GAAP as it relies on judgment and interpretation of what constitutes a major part of an asset's economic life rather than a specific and fixed percentage or amount. GAAP, on the other hand, has a specific requirement that the lease term must be 75% or more of the asset's useful life to be classified as a finance lease.

Which of the Following Indicators Relating to Lease Capitalization Is