At the inception date of the lease, the fair value of the asset measures:
A) the present value of the total benefits remaining with the lessor.
B) the present value of the total benefits associated with the asset.
C) the total of the lease payments over the term of the lease.
D) none of these options.

Question

Quizplus · Accepted Answer

According to the lease accounting standard, at the inception date of the lease, the fair value of the leased asset should be recognized as an asset by the lessee, and as a liability by the lessor. The fair value of the leased asset represents the present value of the total benefits associated with the asset, which includes the use of the asset over the lease term and any residual value. Therefore, option B is the correct choice. Options A, C, and D are incorrect.

At the Inception Date of the Lease, the Fair Value