CERTYNEX IFRS ACADEMY

Quincerot leases forklift trucks for 7 years. Only the lessor can terminate the contract after 3 years, without penalty; Quincerot has no termination right. Quincerot's accountant uses a lease term of 3 years. What is the error?

The probability that the lessor terminates should have been estimated before choosing between 3 and 7 years.

10 years should have been used, adding the 3 years to the 7 years of the contract.

There is no error: the contract ceases to be enforceable as soon as one party can terminate without penalty.

The termination right of the lessor alone was treated as a lessee option; the non-cancellable period is 7 years.