Under IFRS, if land is the sole property being leased, and title does transfer at the end of the lease, it should be accounted for as a(n)
A) operating lease.
B) capital lease.
C) sales-type lease or financing lease.
D) rental agreement.

Question

Quizplus · Accepted Answer

If title does transfer at the end of the lease, it should be accounted for as a sales-type lease or financing lease under IFRS. This is because the transaction meets the definition of a sale under IFRS and the lessor has transferred substantially all the risks and rewards of ownership to the lessee. This requires the recognition of revenue and cost of goods sold at the inception of the lease and the recognition of a lease receivable and interest income over the lease term.

Under IFRS, If Land Is the Sole Property Being Leased