Question bank — IFRS 16 — Leases
340 questions in FR/EN/ES, scored by the real scoring engine.
Objective of the standard8 questions
- IFRS 16 sets out principles intended for both lessees and lessors, not for lessees only.True / falseL1
- IFRS 16 deals only with the recognition and measurement of leases; their presentation and disclosures are governed by other standards.True / falseL1
- According to its objective, the information produced under IFRS 16 must enable users of financial statements to assess the effect of leases on which aspects of the entity?Single choiceL1
- Ardelis applies IFRS 16 to its leases. What must it rely on to apply the standard to a given contract?Single choiceL1
- An entity applies IFRS 16 consistently to contracts with similar characteristics and in similar circumstances.True / falseL1
- Tremora leases two identical warehouses, under identical terms, in the same logistics area. It may apply IFRS 16 differently to each of the two contracts if this improves its gearing ratio.True / falseL1
- For which aspects of the treatment of leases does IFRS 16 set out principles?Single choiceL1
- Which quality does the objective of IFRS 16 expect from the information provided by lessees and lessors about their leases?Single choiceL1
Scope and exclusions12 questions
- IFRS 16 also applies to contracts under which a lessee subleases the right-of-use asset it holds.True / falseL1
- Leases to explore for or use minerals, oil, natural gas or similar non-regenerative resources are excluded from the scope of IFRS 16.True / falseL1
- A lessee is required to apply IFRS 16 to all leases of intangible assets other than those described in paragraph 3(e).True / falseL2
- Which of the following arrangements is excluded from the scope of IFRS 16?Single choiceL1
- Brevalis, owner of a patented process, grants a customer a licence to use that process for five years. Which standard does Brevalis apply to this licence?Single choiceL1
- The broadcaster Cinévia holds, under a licensing agreement within the scope of IAS 38, the right to broadcast a series of films for three years. How does this contract relate to IFRS 16?Single choiceL2
- Which of the following contracts are excluded from the scope of IFRS 16? (several answers)Multiple choiceL1
- Cobalis leases, as lessee, an intangible asset that does not fall within the categories of paragraph 3(e) (licensed rights within the scope of IAS 38 such as films, patents or copyrights). Which statements are correct? (several answers)Multiple choiceL2
- Pressilux leases identified industrial presses to its customers for periods of three to five years. It also grants one of these customers a licence to use its patented surface-treatment process. How does Pressilux analyse these two arrangements with regard to the scope of IFRS 16?Single choiceL2
- The dairy cooperative Verdal leases, for four years, a herd of dairy cows (biological assets within the scope of IAS 41) and, for ten years, the barn that houses it. It wonders which contracts fall within the scope of IFRS 16 as lessee.Single choiceL2
- The studio Altamar leases an identified screening room for six years. It also holds, under a licensing agreement within the scope of IAS 38, exploitation rights to a feature film. Its finance director proposes applying IFRS 16 to both contracts, relying on the option available for intangible assets. Which analysis should be adopted?Single choiceL2
- Norvelis reviews the contracts it has entered into. Which of them fall within the scope of IFRS 16? (several answers)Multiple choiceL2
Short-term and low-value lease exemptions19 questions
- For a short-term lease, a lessee may elect to recognise neither a right-of-use asset nor a lease liability.True / falseL1
- The election to apply the short-term lease exemption is made lease by lease, on a case-by-case basis.True / falseL1
- Fixalis leases a machine for a period of 12 months; the contract gives it an option to purchase the machine at the end. This lease can be treated as a short-term lease.True / falseL2
- How does a lessee that applies the exemption to a short-term lease account for the related lease payments?Single choiceL1
- On what basis does a lessee assess whether the underlying asset of a lease is of low value?Single choiceL2
- Transalis wants to apply the two optional lessee exemptions. At what level is each election made?Single choiceL2
- To conclude that an underlying asset is of low value, which factors must a lessee take into account? (several answers)Multiple choiceL2
- Which of the following assets, taken when new, does the standard cite as possible examples of low-value assets? (several answers)Multiple choiceL1
- Chantiers Orbel leases a site hut for a lease term of … months from 1 April 20X1, with no purchase option. It applies the short-term lease exemption to this class of assets. The lessor grants a rent-free period for the first … months; afterwards, Orbel pays … at the end of each month until the end of the lease. Compute the lease expense for the year ended 31 December 20X1, recognised on a straight-line basis.CalculationL1Variant
- The events organiser Festivia leases a marquee structure for … months from 1 September 20X1, with no purchase option; it applies the short-term lease exemption to this class of assets. The first month is rent-free (… month), then Festivia pays … in arrears, at the end of each following month. The reporting period ends on 31 December 20X1. Determine the lease expense for 20X1 and the accrued expense in the statement of financial position at that date.CalculationL2Variant
- The design studio Graphix leases 25 tablets for … months from 1 March 20X1. After analysis, each tablet is a low-value asset (case datum) and Graphix elects the exemption for this lease. The total payment, payable in advance at the beginning of each month, is … per month in the first year and then … per month in the second year. No other systematic basis is more representative than the straight-line basis. Compute the lease expense for the year ended 31 December 20X1 and the accrued expense at that date.CalculationL2Variant
- The firm Bureaulis leases office chairs for … months from 1 July 20X1. Each chair is a small item of furniture whose value when new is low (case datum); Bureaulis applies the low-value exemption to this lease. Payments are made in advance on 1 July each year: … in the first year, … in the second and … in the third. No other systematic basis is more representative. Determine the lease expense for 20X1 (year ended 31 December) and the prepaid expense at that date.CalculationL2Variant
- Stockalia leases a storage container for … months from 1 November 20X1, with no purchase option, and applies the short-term lease exemption to this class of assets. It pays … in advance at the beginning of each quarter, that is on 1 November 20X1 and 1 February 20X2. Compute the lease expense for the year ended 31 December 20X1.CalculationL1Variant
- The GrandPort group, with several thousand employees, and the young company Pixelia, with 3 employees, each lease a new laptop of the same model for three years. GrandPort treats its lease as relating to a low-value asset, and this analysis of the asset is considered correct. Pixelia's finance director considers that, for such a small entity, the lease payment is material and that the laptop therefore cannot be a low-value asset for Pixelia. Which conclusion should be adopted?Single choiceL3
- Rivéo leases, for two years, a nine-year-old car whose current value is estimated at 2,500. An equivalent model is worth 28,000 when new. The contract contains no purchase option. The accountant proposes applying the low-value exemption. Which analysis is correct?Single choiceL3
- Cowelia, which operates a coworking space, leases 40 laptops for three years; each laptop, when new, would meet the criteria of a low-value asset. Cowelia plans to sublease these laptops to the members of its space. It wishes to apply the low-value exemption to the head lease. Which analysis should be adopted?Single choiceL3
- The accountant of Plieuse & Co analyses the lease of an industrial folding machine: (1) the lease term, at the commencement date, is 11 months; (2) the production machinery class is covered by the short-term lease election; (3) the contract contains an option to purchase the machine at the end, but a term of 11 months is enough to qualify it as a short-term lease; (4) the payments are therefore recognised as an expense on a straight-line basis. Which step contains the error?Single choiceL2
- Optiflux leases 120 sensors for four years, each with a modest price when new. These sensors work only once integrated into a measurement line that Optiflux also leases; they are highly interrelated with each other and with that line. Analysis by the management controller: (1) each sensor, taken individually, has a modest price when new; (2) the low-value election may be made lease by lease; (3) it does not matter that the sensors can only work when integrated into the line: the exemption applies; (4) the payments for the sensors are recognised as an expense on a straight-line basis. Which step contains the error?Single choiceL3
- Fitralis leases a forklift for 9 months, with no purchase option, and applies the short-term lease exemption to this class of assets. After 7 months, it agrees with the lessor to extend the lease by 4 months. Accountant's analysis: (1) the original lease was indeed a short-term lease; (2) the extension changes the lease term; (3) since the total term reaches 13 months, the original lease must be restated from its commencement date, with a right-of-use asset and a lease liability recognised at that date; (4) the payments already expensed are reversed. Which step contains the fundamental error?Single choiceL2
Key definitions12 questions
- The inception date of the lease is the date on which the lessee recognises the right-of-use asset and the lease liability.True / falseL1
- On 1 February 20X2, Grutia and the lessor Dalvia commit to the principal terms of a lease of a crane (inception date). Dalvia makes the crane available to Grutia on 1 May 20X2 (commencement date). On which dates does Dalvia classify the lease and Grutia recognise the right-of-use asset and the lease liability?Single choiceL2
- When a contract contains an early termination option that the lessee is reasonably certain not to exercise, the periods it covers form part of the lease term.True / falseL1
- Hortalis leases a warehouse. The contract provides for a non-cancellable period of 4 years, a first extension option of 2 years, which Hortalis is reasonably certain to exercise given the significant leasehold improvements it is making (case datum), then a second extension option of 3 years, whose exercise is not reasonably certain. What is the lease term?Single choiceL2
- Which rate does the lessee use to discount the lease payments when initially measuring the lease liability?Single choiceL1
- Vexoria knows the interest rate implicit in its lease, which can be readily determined. It may nevertheless choose to discount the lease liability at its incremental borrowing rate if it finds this more practical.True / falseL2
- Mirabel, lessee of a shop, analyses the cash flows provided for in the contract. Which of them are part of the lease payments included in the lease liability at the commencement date? (several answers)Multiple choiceL2
- Calvane determines the cost of the right-of-use asset for leased premises. Which items are included in that cost at the commencement date? (several answers)Multiple choiceL2
- For a lessor, what is a finance lease?Single choiceL1
- Under IFRS 16, the lessee classifies each of its leases as an operating lease or a finance lease, and recognises a right-of-use asset only for the latter.True / falseL1
- The lessor Finaxa has entered into a finance lease. At what amount does it present its receivable at the commencement date, and what does the difference between the gross investment and the net investment in the lease represent?Single choiceL2
- Which of the following operations take place at the commencement date of the lease, and not at the inception date? (several answers)Multiple choiceL2
Whether a contract contains a lease22 questions
- True or false? At the inception date of a logistics services contract, Orvalis must assess whether the contract is, or contains, a lease. This is the case if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.True / falseL1
- True or false? Brevane has established that a supply contract does not contain a lease. It must reconsider this conclusion at each reporting date, even if the terms and conditions of the contract have not been changed.True / falseL1
- Kelmor makes a specified press available to Alvane for the manufacture of 200,000 parts, without setting a calendar duration. How does the notion of a period of time apply to the analysis of a possible lease?Single choiceL1
- Ternis enters into a contract with a supplier for a storage tank, with no serial number or other specification. On the day it is put into service, the supplier installs a particular tank in the Ternis plant; the contract gives the supplier no right to replace it. Does Ternis have an identified asset?Single choiceL2
- The contract of Sylcor provides that the supplier may replace the specified self-propelled truck made available to it. Which of the following statements on whether this substitution right is substantive are correct? (several answers)Multiple choiceL2
- True or false? The contract making a specified server available to Nolvane allows the supplier to replace it, but only from the third year of the contract onwards. This substitution right is not substantive.True / falseL2
- The contract of Pradel allows the supplier to replace the specified compressor installed at its site. Pradel has no information on the supplier's fleet or replacement costs and cannot readily determine whether this substitution right is substantive. What should it conclude?Single choiceL2
- The Marzel group is reviewing three contracts. In which one does the customer have an identified asset?Single choiceL2
- The Vantelle group is analysing five contracts, which contain no substitution rights other than those described. In which ones does the customer have an identified asset? (several answers)Multiple choiceL3
- The controller of Morvan is analysing a four-year contract for a specified industrial printer installed at the Morvan premises. The memo contains four steps. Which step contains an error?Single choiceL3
- Ferlane enters into a five-year contract with a carrier for the transport of a specified volume of goods by railcars. The contract specifies the type of railcars, but for each journey the carrier chooses the railcars used from a large pool available nearby; it can replace them at any time without Ferlane's consent, and this flexibility allows it to optimise the use of its pool at low cost. Between journeys, the railcars stay at the carrier's sites. What conclusion should be reached?Single choiceL3
- A supplier makes a specified bottling line available to Dorlan for six years; the line is installed and fixed in the Dorlan plant. The contract allows the supplier to replace it with an equivalent line. A replacement would require costly dismantling and transport, with no identifiable gain for the supplier. The supplier nevertheless points to the possibility that a future customer might one day agree to pay an above-market price for this line, a possibility considered unlikely at the inception date. Which analysis should be retained?Single choiceL3
- Under a ten-year contract, Halbrec has exclusive use of a specified cogeneration plant. It receives all the electricity produced, which it consumes, as well as the residual heat, which it sells to a neighbouring network. Which benefits does Halbrec take into account in assessing whether it obtains substantially all of the economic benefits from use of the plant?Single choiceL3
- True or false? The retailer Lumira has exclusive use of a specified retail unit. The consideration comprises a fixed part and a part equal to 3% of the sales made in the unit, paid to the owner. This payment prevents Lumira from obtaining substantially all of the economic benefits from use of the unit.True / falseL3
- Rivelo has exclusive use of a specified truck for three years, but the contract limits its use to a defined region and to 60,000 km a year. Rivelo uses the truck fully within those limits. How should it assess whether it obtains substantially all of the economic benefits from use?Single choiceL3
- The contract entered into by Ostral for a specified machine tool provides for several rights. Which of them are rights to direct how and for what purpose the machine is used?Multiple choiceL3
- The Calvène group obtains exclusive use of a specified vessel for eight years, with no substitution right for the supplier. Calvène decides which goods are carried, which ports are served and the departure dates, subject to clauses that prohibit sailing in high-risk areas and carrying hazardous materials. The supplier provides the crew and maintains the vessel. The internal auditor concludes that the contract does not contain a lease. Which statement in the auditor's memo is wrong and distorts the conclusion?Single choiceL4
- Before signing the contract, Solenne designed a solar farm (location, capacity, panel orientation) that the supplier builds and then operates for it for twenty years, with no substitution right. This design, supplemented by contractual restrictions, predetermines how and for what purpose the farm is used; no relevant decision remains to be made during the period of use. The supplier handles operation and maintenance. Does Solenne have the right to direct the use of the farm?Single choiceL4
- Ardance signs a six-year contract with a crane supplier. For the first two years, a specified crane is made available for its exclusive use, with no substitution right, and Ardance alone decides how it is used on its construction sites. For the following four years, the supplier performs lifting operations on demand with its own cranes: it chooses the crane, its deployment and when it is used. What conclusion should be reached?Single choiceL4
- Nexalis signs a five-year contract with a hosting provider. The contract specifies 12 server racks, identified by their number and located in a room reserved for Nexalis; the provider can replace them only in the event of a breakdown. Nexalis decides which applications are installed, how much capacity it devotes to them and the processing schedules. The provider imposes security and temperature rules designed to protect its equipment, and it carries out the maintenance. Write a memo concluding, step by step, on whether there is a lease at the inception date.JudgmentL4
- The joint arrangement Boréa, as defined in IFRS 11, is jointly controlled by Altis and Corva. It signs on its own behalf a three-year contract for a specified drilling vessel, with no substitution right for the supplier, and has exclusive use of it. The joint arrangement's committee decides the drilling sites, the schedule and the drilling depth; the supplier provides the crew, which follows these instructions, and may prohibit access to areas of armed conflict. Altis argues that, as neither company controls the vessel alone, there is no lease. Write a judgement memo.JudgmentL4
- A trainee at Pelvane has to apply the flowchart provided in IFRS 16 to determine whether a contract is, or contains, a lease. In what order does the flowchart sequence the questions?Single choiceL1
Portfolio application and combination of contracts6 questions
- Quarnel holds 300 leases of commercial vehicles with similar characteristics. It is considering applying IFRS 16 at portfolio level rather than contract by contract. On what condition is this practical expedient permitted?Single choiceL2
- Velmar signs two contracts on the same day with the same supplier. Which of the following situations does not, on its own, require them to be combined?Single choiceL2
- The accounting department of the Ostreva group is preparing a fact sheet on combining contracts under IFRS 16. Which elements are part of the conditions that require two contracts to be combined? (several answers)Multiple choiceL2
- On 1 March 20X1, Gardelle signs two contracts with Imbra: the provision of a specified warehouse for five years and a three-year handling service. The warehouse contract provides for a 15% discount on the consideration as long as the handling contract is not terminated. How should Gardelle account for these contracts?Single choiceL3
- On 10 June 20X2, Pennec signs with Arlis a contract for specified offices. On 14 June 20X2, it signs with Arlis Services, a subsidiary of Arlis, a contract for the furniture of those offices. The Arlis group negotiated the two contracts together, as an overall fit-out offer whose commercial objective can only be understood by considering them together. What conclusion should be reached?Single choiceL3
- Thalgo applies IFRS 16 to a portfolio of 1,200 forklift leases with similar characteristics; it reasonably expects an effect that does not differ materially from applying it contract by contract. How does it establish its estimates and assumptions?Single choiceL3
Lease and non-lease components13 questions
- Corvel, a lessee, enters into a five-year contract containing a lease of photocopiers and their maintenance by the lessor. It has not elected the practical expedient not to separate components for this class of assets. How does it account for the maintenance?Single choiceL2
- In a single contract, Ferrand obtains from a lessor a tractor, a trailer that can be used with tractors readily available on the market, and a maintenance service for both vehicles. It also pays file fees that cover administrative tasks of the lessor and transfer no good or service to it. Which statements are correct? (several answers)Multiple choiceL2
- Belcour, a lessee, is considering not separating the non-lease components of its vehicle leases. Which statement about this practical expedient is correct?Single choiceL2
- Oriande, a lessor, makes available to Peyrac, a lessee, under a single four-year contract, an item of laboratory equipment and a calibration service. Peyrac has elected the practical expedient not to separate components for this class of assets. How does each of the two companies account for the consideration in the contract?Single choiceL3
- Lantier, a lessee, enters into a contract that includes the lease of an industrial boiler and its maintenance. The lessor never sells maintenance separately, but several service providers on the market charge for similar maintenance. Lantier separates the components. How does it determine the stand-alone price of the maintenance?Single choiceL3
- Dunval, a lessee, leases vehicles with a maintenance package and premises with a cleaning service. It elects the practical expedient not to separate components for the vehicles class, but not for the premises class. What is the effect of these elections?Single choiceL3
- Brissac, a lessee, pays the lessor … a year, in arrears (at the end of each year), for the lease of a packaging machine and its maintenance. The stand-alone prices are … for the lease and … for the maintenance. Brissac separates the components. What annual amount does it allocate to the lease component?CalculationL2Variant
- The Aubrac firm pays each month, at the start of the month, … for a specified office floor and reception and security services provided by the lessor. The monthly stand-alone prices observed on the market are … for the offices and … for the services. Aubrac, a lessee, does not use the practical expedient. What portion of the monthly consideration goes to the lease component?CalculationL2Variant
- The haulier Elvire, a lessee, pays … a year, at the end of each year, for a specified heavy goods vehicle, its maintenance and the training of its drivers by the lessor. The stand-alone prices, based on the prices charged separately by similar suppliers, are: lease …, maintenance …, training …. Elvire separates the components. What annual amount does it allocate to the lease component?CalculationL3Variant
- Vauclair, a lessee, pays each year, at the end of the year, … for the lease of a refrigerated warehouse and a technical monitoring service, plus … of administrative charges of the lessor, which transfer no good or service to it. The stand-alone prices are … for the lease and … for the monitoring. Vauclair separates the components. What annual amount does it allocate to the lease component?CalculationL3Variant
- A private hospital, the Sorbiers clinic, obtains from a lessor a specified medical scanner with a technical support service. It pays, at the start of each year, … for the scanner and the support, and … of file-keeping charges that remunerate internal tasks of the lessor without providing it with any good or service. Stand-alone prices: scanner …, support …. The clinic, a lessee, does not apply the expedient not to separate components. Compute the annual consideration of the lease component.CalculationL3Variant
- Batigra, a lessee, pays … a year, at the end of each year, for a mobile crane, a flatbed truck and their maintenance, under a single contract. Batigra can benefit from each vehicle on its own, and neither is highly dependent on, or highly interrelated with, the other. Stand-alone prices: crane …, truck …, maintenance …. Batigra separates the components. Compute the annual consideration allocated to each of the two lease components.CalculationL3Variant
- The Lisandre printing works, a lessee, pays … a year, at the start of each year, for an offset press, a folding machine and a technical support service provided by a single lessor. Each machine can be used on its own with readily available resources and neither is highly dependent on, or highly interrelated with, the other. Stand-alone prices: press …, folding machine …, support …. Determine the annual consideration of the press lease component and of the folding machine lease component.CalculationL3Variant
Lease term and options18 questions
- The lease term includes the non-cancellable period as well as the periods covered by an extension option that the lessee is reasonably certain to exercise.True / falseL1
- The lessor of Ombrelle grants three rent-free months at the start of an office lease. Those three months are excluded from the lease term, since no lease payment is made during them.True / falseL1
- Calvenor leases a hangar for a non-cancellable period of 5 years, with an option to extend for 3 years. The analysis of facts and circumstances concludes that Calvenor is reasonably certain to exercise that option. What lease term should be used?Single choiceL1
- Fenouillet leases a warehouse for 6 years. The contract allows only the lessor to terminate it at the end of the fourth year; Fenouillet has no termination right. What non-cancellable period should be used?Single choiceL2
- At each reporting date, the lessee reassesses whether it is reasonably certain to exercise its extension options on the basis of changes in market rents alone, even in the absence of any significant event within its control.True / falseL2
- At the commencement date, Pradelle must assess whether it is reasonably certain to exercise the extension option in a lease of a logistics site. Which of the following are facts and circumstances creating an economic incentive that must be considered? (several answers)Multiple choiceL2
- Garonnelle leases an archive room for an initial period of 12 months. Thereafter the contract continues month to month, and each party may terminate it at any time without the other's permission, with no penalty or other cost (no improvements, room easily replaceable). Garonnelle plans to occupy the room for 36 months. Over which period is the contract enforceable for determining the lease term?Single choiceL2
- Lumbres leases a shop for a non-cancellable period of 3 years, with an option to extend for 5 years. At the commencement date, it makes significant leasehold improvements with a useful life of 8 years that cannot be moved elsewhere. The accountant uses a lease term of 3 years on the grounds that the option has not yet been exercised, with no further analysis. What is the error?Single choiceL2
- At the commencement date, Hautecombe excluded a 4-year extension option from the lease term of its warehouse lease. During the third year, it decides to install in the warehouse a highly customised automated storage system, not anticipated at the outset, from which it will derive significant economic benefit when the option becomes exercisable. The contract itself is not changed. What must Hautecombe do?Single choiceL3
- At the commencement date, Mirandol used a lease term of 5 years for the lease of a workshop, its 2-year extension option not being reasonably certain. At the end of the fifth year, Mirandol notifies the lessor that it exercises that option, as provided by the contract. How is the lease term treated?Single choiceL3
- Vaudrey leases an office floor for a lease term of 6 years; its 4-year extension option was not included in the lease term. At the beginning of the second year, Vaudrey enters into a sublease of that floor for 7 years, that is beyond the end of the previously determined lease term. What is the consequence for the head lease?Single choiceL3
- When an event provided for in the contract contractually obliges the lessee to exercise an option not previously included in the lease term, the entity revises the lease term.True / falseL3
- Ternoise leases several industrial sites. Which of the following situations, arising after the commencement date, are significant events within its control that require the lease term of its leases to be reassessed?Multiple choiceL3
- Brocéliane, a clothing retailer, leases a city-centre unit for a non-cancellable period of 4 years, with an option to extend for 4 years at a rent fixed at the outset, which management expects to be below expected market rents. Brocéliane spends 900,000 on non-transferable leasehold improvements with a useful life of 10 years. This shop is the most profitable in its network, and the retailer in practice keeps its shops for 8 to 10 years. Write a memo determining the lease term at the commencement date.JudgmentL4
- Arvelle leases a specific packaging line for a non-cancellable period of 2 years, renewable each year at Arvelle's option for 5 further years, at a rent set at 40% of the initial rent, a case datum considered well below market. The line is integrated into the plant; replacing it would require stopping production for 3 months. Arvelle usually uses this type of equipment for 7 years. Management has made no formal renewal decision. Which analysis is most consistent with IFRS 16?Single choiceL4
- 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?Single choiceL2
- Saint-Aubrac leases three warehouses. During the year: (1) market rents in the region of the North warehouse rose by 20%, making its unincluded extension option very favourable; (2) Saint-Aubrac completed in the South warehouse significant leasehold improvements not anticipated at the commencement date, from which it will benefit significantly if it extends; (3) Saint-Aubrac formally exercised the extension option of the East warehouse, which was not included in the lease term. Write a memo stating, for each warehouse, whether the lease term must be reassessed, revised or left unchanged.JudgmentL3
- Pellerin leases a construction machine for a non-cancellable period of 3 years, with an option to extend for 2 years. If Pellerin does not extend, it must pay the lessor, under a residual value guarantee, an amount such that the lessor's return is substantially the same whether or not the option is exercised. What conclusion should be reached on the lease term?Single choiceL4
Recognition at the commencement date12 questions
- At the commencement date of a lease that is not exempt, the lessee recognises a right-of-use asset and a lease liability.True / falseL1
- Estaing leases premises for 6 years; no exemption applies. It records nothing at the commencement date and expenses each lease payment when paid. This treatment complies with IFRS 16.True / falseL1
- Morvalis leases a packaging line for 5 years; the lease does not qualify for any exemption. What does Morvalis recognise at the commencement date?Single choiceL1
- For Thalassa's lease of a warehouse, the inception date of the lease is 1 March 20X1, the commencement date is 1 June 20X1 and the first lease payment is made on 30 June 20X1. Thalassa's reporting date is 31 December 20X1. On which date does Thalassa recognise the right-of-use asset and the lease liability?Single choiceL2
- Which of the following statements on recognition by the lessee at the commencement date are correct? (several answers)Multiple choiceL2
- Valcrose leases 40 tablets for its sales staff. The lease is of low-value assets and Valcrose has elected the corresponding exemption. What does it recognise at the commencement date?Single choiceL2
- Since Orbelle is not the legal owner of the truck it leases, it cannot recognise any asset at the commencement date of the lease; it merely provides a disclosure in the notes.True / falseL1
- Belcombe leases a warehouse for 5 years from 1 January 20X1, the commencement date. Annual lease payments of 60,000 are made at the end of each year. The present value of those payments at the incremental borrowing rate of 6.5%, rounded to the nearest euro, is …. No payment is made at or before the commencement date; there are no initial direct costs, no lease incentives and no restoration obligation. Record the entry at the commencement date.Journal entryL1Variant
- The Aubrive group leases a fleet of delivery vehicles for 3 years; the commencement date is 1 April 20X1. Monthly lease payments of … are made in arrears, the first on 30 April 20X1. The finance department measures the present value of the lease payments not yet paid at …. There are no initial direct costs, lease incentives or restoration costs to consider. Record the entry on 1 April 20X1.Journal entryL2Variant
- Corbières leases an office building for 5 years. Annual lease payments of … are payable in advance; the first is paid at the commencement date. The present value of the 4 remaining payments, at the incremental borrowing rate of 4% and rounded to the nearest euro, is …. There are no initial direct costs, no lease incentives and no restoration costs. Record the entry at the commencement date.Journal entryL2Variant
- Kerlouan, a coffee roaster, leases a sales kiosk in a railway station for 15 months, through 5 quarters each payable at the start of the quarter; the quarterly payment is … and the first is paid on the day the kiosk is made available, the commencement date. The 4 remaining quarterly payments, discounted at the incremental borrowing rate of 2% per quarter, amount to … (rounded to the nearest euro). No other element enters the cost. Record the entry at the commencement date.Journal entryL2Variant
- Dunières leases a workshop; lease payments are made in arrears and their present value at the commencement date is …. At the commencement date, Dunières pays an intermediary a commission of …, which, according to the case data, is an initial direct cost of the lease. There are no lease incentives and no restoration costs. Record the entry at the commencement date.Journal entryL2
Initial measurement of the lease liability14 questions
- At the commencement date, the lease liability is measured at the present value of the lease payments that are not paid at that date.True / falseL1
- Lisandre leases a shop for a fixed payment plus an additional amount equal to 4% of its revenue. The additional amount, reliably estimated in the budget, must be included in the lease liability at the commencement date.True / falseL2
- Fontbelle leases a machine tool. The lessor does not provide the information needed to compute the interest rate implicit in the lease, which Fontbelle cannot readily determine. Its incremental borrowing rate is 5%, its weighted average cost of capital 9% and its term deposits earn 2%. Which rate should be used to discount the lease payments at the commencement date?Single choiceL2
- Hermelin analyses the payments provided for in a warehouse lease in order to measure the lease liability at the commencement date. Which of them are included? (several answers)Multiple choiceL2
- Ravenne leases a machine for 5 years; the 5 annual payments of 20,000 are payable in advance, the first being paid at the commencement date. The interest rate implicit in the lease, which can be readily determined, is 5%. The accountant measures the lease liability by discounting the 5 payments, including the one made at the commencement date. What is the error?Single choiceL2
- Cerdagne leases a press for 4 years. The contract provides that each annual payment is due only if the press proves capable of operating during the year; the press is new, maintained by the lessor, and nothing suggests that it might not operate. How should these payments be treated in measuring the lease liability?Single choiceL2
- Valdrôme leases a building for 6 years. The annual payment, made at the end of each year, is 100,000 based on the consumer price index at the commencement date, and is then adjusted each year according to changes in that index. The group's economists forecast inflation of 2% per year. Which cash flows does Valdrôme discount to measure the lease liability at the commencement date?Single choiceL3
- The lease of a rotary press of Imprimerie Sorgues provides that at the end of the third year Sorgues must either buy the press or extend the lease for 2 years; both branches are realistic and one of them must be paid. At the commencement date, at the rate of the lease, the present value of the payments in the purchase branch is 119,100 and that of the extension branch is 112,400. What discounted amount does Sorgues include in the lease liability in respect of these in-substance fixed payments?Single choiceL4
- Boréal leases a warehouse for … years. Fixed annual lease payments of … are made at the end of each year; no payment is made at the commencement date. Since the implicit rate cannot be readily determined, Boréal uses its incremental borrowing rate of …. Compute the lease liability at the commencement date, rounded to the nearest euro.CalculationL2Variant
- The Tramontane group leases a fleet of refrigerated trucks for … years, for … per year paid at the end of each year. The lessor has provided all the lease data: the interest rate implicit in the lease, which can be readily determined, is …. Tramontane's incremental borrowing rate is …. Compute the lease liability at the commencement date, rounded to the nearest euro.CalculationL3Variant
- Mistralis leases an office floor for … years. Annual lease payments of … are payable in advance, at the start of each year; the first is paid at the commencement date. The incremental borrowing rate, used in the absence of a readily determinable implicit rate, is …. Compute the lease liability at the commencement date, rounded to the nearest euro.CalculationL3Variant
- The Agrinord cooperative leases a combine harvester for … annual seasons. Each lease payment of … is due at the start of the season, and the first is paid on the day the machine is delivered, which is the commencement date. The interest rate implicit in the lease, known to Agrinord, is …. Determine the initial amount of the lease liability, rounded to the nearest euro.CalculationL3Variant
- Cévenole leases a mobile crane for … years, for annual lease payments of … made at the end of each year. It guarantees the lessor that the crane will be worth at least … at the end of the lease and will pay the difference if its value is lower. At the commencement date, Cévenole expects the crane to be worth … at that date. As the implicit rate cannot be readily determined, its incremental borrowing rate of … is used. Compute the lease liability at the commencement date, rounded to the nearest euro.CalculationL4Variant
- Pyrène leases an industrial furnace for … years: a fixed annual payment of … made at the end of each year and a variable payment of 2% of the sales generated with the furnace, estimated at … per year. At the end of the lease, Pyrène may buy the furnace for …; the analysis concludes that the exercise of this option is reasonably certain. The implicit rate cannot be readily determined; the incremental borrowing rate of … is used. Compute the lease liability at the commencement date, rounded to the nearest euro.CalculationL4Variant
Initial measurement of the right-of-use asset13 questions
- True or false: at the commencement date, the lessee measures the right-of-use asset at the fair value of the underlying asset.True / falseL1
- True or false: initial direct costs incurred by the lessee to obtain the lease are included in the cost of the right-of-use asset.True / falseL1
- Ombrelia leases offices for five years. Which of the following items is NOT included in the initial cost of its right-of-use asset?Single choiceL1
- Fermatis leases a warehouse. The lease requires it to dismantle, at the end of the lease, the racking it installs. Which items are included in the initial cost of its right-of-use asset? (several answers)Multiple choiceL2
- Lamivert leases for 10 years land on which it operates a concrete batching plant; the concrete produced is sold as inventory. The lease requires it to restore the ground damaged by the activity: each year of production creates a new restoration obligation. How should the restoration costs incurred in 20X2 as a result of that year's production be treated?Single choiceL2
- Sorelia signs a lease of a warehouse that the lessor is building for it. During construction, before the commencement date, Sorelia pays the lessor 50,000 for its right to use the future warehouse. How is this payment treated?Single choiceL2
- Bravelle leases an office floor. At the commencement date, the initial lease liability amounts to …. Before that date, Bravelle paid the lessor a first lease payment of … and received from it a lease incentive of …. It incurred initial direct costs of …. The lease requires it to restore the premises when it leaves; the estimate of those costs, measured under IAS 37, is … (given). Compute the cost of the right-of-use asset.CalculationL2Variant
- The haulier Kerval leases a logistics depot fitted with modular loading docks. On the commencement date itself, it pays a lease payment of … and receives from the lessor a contribution of … to its installation costs, qualifying as a lease incentive. The present value of the lease payments still due at that date is …. Kerval bore … of initial direct costs and will have to dismantle the docks at the end of the lease; the estimate of that dismantling, determined under IAS 37, is … (given). What is the initial cost of the right-of-use asset?CalculationL2Variant
- Nordalys leases a bottling line. The lease provides for … annual lease payments of …, payable in arrears (at the end of each year). The interest rate implicit in the lease cannot be readily determined; Nordalys's incremental borrowing rate is …. Nordalys incurred initial direct costs of …; the estimate of the restoration costs required by the lease, measured under IAS 37, is … (given). Compute the initial lease liability and then the cost of the right-of-use asset (rounded to the nearest euro).CalculationL3Variant
- The Calimer clinic leases an imaging device. It pays … annual lease payments of … in advance (at the start of each year); the first is paid on the commencement date. The interest rate implicit in the lease, which can be readily determined, is …. Calimer incurred … of initial direct costs and received from the lessor a lease incentive of … at the commencement date. No restoration is required. Compute the initial lease liability and the cost of the right-of-use asset (rounded to the nearest euro).CalculationL3Variant
- Helvane leases a shop. At the commencement date: lease liability of …; initial direct costs paid in cash of …; contractual obligation to restore the shop, recognised as a provision under IAS 37 for … (given). No lease payment was made in advance. Record the initial recognition entry.Journal entryL2Variant
- The Myrtea brewery leases a fermentation hall. At the commencement date, it receives from the lessor a lease incentive of … and pays … of initial direct costs. The lease liability is …. The lease requires the tanks to be dismantled at the end of the lease; the related provision, measured under IAS 37, is … (given). Record the initial recognition of the lease by Myrtea.Journal entryL3Variant
- Tessandre leases a hangar for its drone fleet. Commencement-date file: lease liability 450,000; lease payment made to the lessor one month before the commencement date 25,000; amount reimbursed by the lessor to induce Tessandre to sign (lease incentive) 30,000; commission paid to an intermediary to obtain the lease, qualifying as an initial direct cost 7,000; estimated costs of restoring the hangar required by the lease, measured under IAS 37, 16,000 (given). What is the cost of the right-of-use asset?Single choiceL3
Subsequent measurement of the right-of-use asset17 questions
- True or false: after the commencement date, the lessee measures the right-of-use asset under the cost model, unless it applies one of the other models provided for by IFRS 16.True / falseL2
- True or false: when the lease transfers ownership of the underlying asset to the lessee at the end of the lease, the right-of-use asset is depreciated over the lease term, even if the useful life of the asset is longer.True / falseL1
- Orlinde measures its right-of-use assets under the cost model. Which requirements does it apply to depreciate them?Single choiceL1
- Pradel leases a hydraulic excavator for a lease term of 6 years. The excavator's useful life is 10 years. The lease does not transfer ownership and contains no purchase option. Over what period is the right-of-use asset depreciated?Single choiceL2
- Ardoisine leases a rotary printing press for 5 years; the lease provides for the automatic transfer of ownership of the press to Ardoisine at the end of the lease. The useful life of the press is estimated at 8 years. Over what period is the right-of-use asset depreciated from the commencement date?Single choiceL2
- Quintal measures its right-of-use assets under the cost model. Which items enter the carrying amount of a right-of-use asset at the reporting date? (several answers)Multiple choiceL2
- The Vireo chain closes one of its leased stores, whose lease still runs for 4 years, and identifies an indication of impairment of the related right-of-use asset. What must it do?Single choiceL2
- The Solvane group measures all its investment property under the IAS 40 fair value model. It leases an office building for 15 years, which it fully sublets to third parties; it is established (given) that this right-of-use asset meets the definition of investment property. How does Solvane measure this right-of-use asset after the commencement date?Single choiceL3
- Belrive applies the IAS 16 revaluation model to its Land and buildings class and the cost model to its vehicles. It holds three right-of-use assets relating to warehouses (Land and buildings class) and two right-of-use assets relating to trucks. Which policy does IFRS 16 allow it?Single choiceL3
- Ostrade recognised a right-of-use asset for a forklift truck at a cost of …. The lease term is … years and the useful life of the forklift is … years. The lease does not transfer ownership and contains no purchase option. Ostrade uses the straight-line method (method chosen by the entity). Compute the annual depreciation charge and the carrying amount of the right-of-use asset at the end of the first year.CalculationL2Variant
- The Galmine laboratory leases a spectrometer for a lease term of … years, with a purchase option at the end of the lease that it is reasonably certain to exercise: the exercise price was included in the lease liability and the cost of the right-of-use asset, i.e. …, therefore reflects the exercise of the option. The useful life of the spectrometer is … years. Straight-line depreciation (method chosen). Compute the annual depreciation charge and the carrying amount at the end of the second year.CalculationL2Variant
- Pellane, whose reporting period ends on 31 December, leases computer servers with a commencement date of 1 April 20X1. Cost of the right-of-use asset: …; lease term: … months; useful life of the servers: … years. No transfer of ownership and no purchase option. Pellane depreciates on a straight-line basis, pro rata to the months of use (method chosen). Compute the 20X1 depreciation charge and the carrying amount at 31 December 20X1.CalculationL3Variant
- Tavelin depreciates on a straight-line basis over the lease term (… years, shorter than the useful life) a right-of-use asset with a cost of …. After … years of depreciation, the lease liability is remeasured upwards by … (given amount, resulting from a revision of the lease payments). Case assumption: Tavelin allocates the new carrying amount on a straight-line basis over the 3 remaining years. Compute the carrying amount of the right-of-use asset after the adjustment and the depreciation charge for year 3.CalculationL3Variant
- The Corbelle firm leases premises for a lease term of … years, shorter than their useful life; the right-of-use asset, with a cost of …, is depreciated on a straight-line basis over that term. After … years, a decrease in future lease payments leads to a reduction of the lease liability by … (given amount). The firm assumes a straight-line allocation of the new balance over the remaining term. Determine the adjusted carrying amount of the right-of-use asset and the depreciation charge for the fourth year.CalculationL3Variant
- Alverine recognised a right-of-use asset for a production photocopier at …. Lease term: … years; useful life of the photocopier: … years; no transfer of ownership and no purchase option. Straight-line depreciation (method chosen). Record the depreciation entry for the first year.Journal entryL2Variant
- The Brunelle shipyard leases a harbour crane. The lease, for … years, provides that ownership of the crane will transfer to Brunelle at the end of the lease. The right-of-use asset has a cost of …; the useful life of the crane is … years. Brunelle depreciates on a straight-line basis (method chosen). Record the annual depreciation charge.Journal entryL3Variant
- The consolidation department of the Arvenne group is preparing a memo on the measurement of right-of-use assets after the commencement date. Which statements are correct? (several answers)Multiple choiceL3
Subsequent measurement of the lease liability13 questions
- True or false: after the commencement date, the lease liability is increased by interest and reduced by the lease payments made, and it is remeasured upon a reassessment or a lease modification.True / falseL1
- True or false: each year, interest on the lease liability is computed by applying the discount rate to the initial amount of the lease liability.True / falseL1
- Ramberte leases retail premises: fixed annual payment, plus a variable payment equal to 3% of the store's revenue, not included in the lease liability. The variable payment due on 20X1 sales amounts to 18,000. No standard requires it to be included in the carrying amount of another asset. How should it be treated?Single choiceL2
- Liseron, lessee of a store lease, pays a fixed annual lease payment included in the lease liability and a variable top-up based on its revenue, not included. No amount is included in another asset. Among the following items relating to the lease liability and payments, which are recognised as expenses of the year? (several answers)Multiple choiceL2
- At 1 January 20X1, the commencement date, Lorvane's lease liability amounts to … (given), computed at a rate of …. Annual lease payments of … are paid in arrears, on 31 December. Compute the interest expense for 20X1 and the lease liability at 31 December 20X1 after payment.CalculationL2Variant
- The Dunelle cooperative leases a cold room from 1 January 20X1. The initial lease liability is … (given) at a discount rate of …; each lease payment of … is made at year-end, on 31 December. Determine the interest for 20X2 and the balance of the lease liability at 31 December 20X2.CalculationL3Variant
- Ferlane leases an industrial furnace from 1 January 20X1 (commencement date, year-end 31 December). The 4 annual lease payments of … are paid in advance, each 1 January; the first was paid at the commencement date. The lease liability, which covers the 3 remaining payments, amounts to … (given, rounded), at a rate of …. Compute the interest for 20X1 and the lease liability at 31 December 20X1 (rounded to the nearest euro).CalculationL3Variant
- The Valmeuse association leases a minibus from 1 January 20X1 (year-end 31 December). The lease provides for … annual lease payments of … payable in advance each 1 January, the first at the commencement date. The interest rate implicit in the lease, which can be readily determined, is …. Rounding each amount to the nearest euro, compute the initial lease liability, the interest for 20X2 and the lease liability at 31 December 20X2.CalculationL4Variant
- At 1 January 20X1, Marvelle has a lease liability of …, at a discount rate of …. The annual lease payment of … is paid in arrears on 31 December 20X1. Record the 20X1 entries relating to the lease liability: interest for the year, then payment of the lease instalment.Journal entryL2Variant
- The Orvigne hotel group leases a fleet of electric shuttles. At the start of the year, the balance of the lease liability is …; the incremental borrowing rate used at the commencement date is …. The annual lease payment of … is settled at year-end. Record, for the year, the finance charge and then the settlement of the lease payment.Journal entryL3Variant
- For 20X1, the accountant of Calderis recorded three entries on a lease (opening lease liability 220,000, rate 5%, lease payment of 52,000 paid on 31 December): (1) depreciation of the right-of-use asset of 40,000; (2) debit interest expense, credit lease liability 11,000; (3) debit lease expense, credit cash 52,000. Which entry is wrong?Single choiceL3
- Estivale operates a leased boutique. At 1 January 20X1, the lease liability is 400,000 at a rate of 5%; the fixed lease payment of 90,000 is paid on 31 December. The lease also provides for a variable payment equal to 2% of the boutique's revenue, not included in the lease liability; 20X1 revenue is 1,300,000. No amount is included in another asset. State the 20X1 expenses relating to the lease liability and the variable payments (excluding depreciation of the right-of-use asset) and the lease liability at 31 December 20X1.Single choiceL4
- Norvelle has a lease liability of 200,000 at 1 January 20X1, at a rate of 5%, and pays 46,000 every 31 December. It recognised interest of 10,000 in 20X1, and again 10,000 in 20X2, applying 5% to the initial liability. Which finding is correct?Single choiceL2
Reassessment of the lease liability11 questions
- Orvane leases a warehouse. After the commencement date, several events change the expected lease payments. In which of these cases must Orvane remeasure its lease liability by discounting the revised lease payments using a revised discount rate?Single choiceL2
- The Talvio group reviews its leases at year end. In which situations is the lease liability remeasured using an unchanged discount rate? (several answers)Multiple choiceL2
- Brévia's office lease provides for an annual rent review based on a published index, applicable on each 1 January. The index published in October 20X2 announces a rent increase from 1 January 20X3. On which date does Brévia remeasure its lease liability to reflect this increase?Single choiceL3
- Calvène leases a workshop; the annual payment of … is paid at the end of each year. At 1 January 20X4, … payments remain and the lease liability amounts to … (original rate …). On that day, Calvène exercises an extension option of … years, at the same rent, which was not included in the lease term. The interest rate implicit in the lease cannot be readily determined; Calvène's incremental borrowing rate at that date is …. Compute the remeasured lease liability and the adjustment to the right-of-use asset (rounded to the nearest euro).CalculationL3Variant
- The carrier Nordelis leases a logistics platform (… per year, paid at year end). At the end of 20X5, after significant leasehold improvements decided by Nordelis and not anticipated at the outset, management becomes reasonably certain to exercise the … years-year extension option at the same rent, previously excluded from the lease term. … years non-cancellable payments remain; the lease liability is … (initial rate …). The interest rate implicit in the lease cannot be readily determined and the current incremental borrowing rate is …. Determine the remeasured lease liability and the adjustment to the right-of-use asset (rounded to the nearest euro).CalculationL4Variant
- The retailer Ambrelis leases a shop; the payment, made at year end, is indexed to a price index. At 1 January 20X3, the effective date of the review, the annual payment rises from … to … for the … remaining payments. The lease liability amounts to … before the review, computed at a rate of …; Ambrelis's incremental borrowing rate at that date is …. Compute the remeasured lease liability and the adjustment to the right-of-use asset (rounded to the nearest euro).CalculationL3Variant
- The Solaris clinic leases a scanner; the payment, made at year end, follows a healthcare cost index. The management controller proposes remeasuring the lease liability at the current market rate of …, which he considers more representative. At 1 January 20X4, when the review takes effect, the annual payment rises from … to … for the last … payments. The lease liability is … (original rate …). Compute the remeasured lease liability and the increase in the right-of-use asset (rounded to the nearest euro).CalculationL4Variant
- Lumeo leases a bottling line and guarantees the lessor the residual value of the equipment, which will be returned in one year. At the end of 20X5, thanks to a strong second-hand market, the amount Lumeo expects to pay under this guarantee in one year falls from … to …. The discount rate of the lease is …; the carrying amount of the right-of-use asset is …. Record the remeasurement entry (for simplicity, the decrease in the right-of-use asset is posted directly to the right-of-use asset account).Journal entryL4Variant
- The car rental company Vectra is the lessee of a fleet of electric shuttles that it will return in … years while guaranteeing their residual value. At the end of 20X6, Vectra revises the amount it expects to pay under this guarantee at maturity: … instead of …. The discount rate of the lease is …, and the right-of-use asset has a carrying amount of …. Record the remeasurement (the decrease in the right-of-use asset is posted directly to its account).Journal entryL4Variant
- Herbonne Printing leases a digital press; … annual payments of … remain, paid at year end, and the lease liability amounts to … (original rate …). After having the press adapted to its special formats, Herbonne becomes reasonably certain to exercise the purchase option of …, payable at the end of the lease, which it had not taken into account so far. The interest rate implicit in the lease cannot be readily determined; Herbonne's incremental borrowing rate is now …. Record the remeasurement entry (amount rounded to the nearest euro).Journal entryL3
- The Kestrel laboratory leases a research building with a purchase option that it had not considered reasonably certain to exercise. After installing very costly clean rooms, Kestrel concludes that it will exercise the option. The lessor does not provide the data needed to compute the interest rate implicit in the lease for the remaining term. The CFO hesitates between several treatments. Which one complies with IFRS 16?Single choiceL4
Lease modifications (lessee)9 questions
- Pélican leases two floors of a building. It obtains from the lessor the lease of a third floor for the remaining term, for an additional payment equal to the rental price of a comparable floor, less the marketing costs the lessor will not incur. How does Pélican account for this modification?Single choiceL3
- The Ardelle firm leases an office floor. Halfway through, it leases an additional floor in the same building for the remaining term, with an additional payment 30% below the price charged for comparable space; no circumstance specific to the contract justifies this discount, granted to retain a major tenant. What is the appropriate treatment at the effective date of the modification?Single choiceL3
- Ostral leases a hangar; … annual payments of … remain, paid at year end, and the lease liability amounts to … (original rate …). The lease contains no extension option. On 1 January 20X5, Ostral and the lessor sign an amendment adding … years at the same rent; it does not cover any additional asset. The interest rate implicit in the lease cannot be readily determined; Ostral's incremental borrowing rate at the effective date is …. Compute the modified lease liability and the adjustment to the right-of-use asset (rounded to the nearest euro).CalculationL3Variant
- The logistics provider Verlaine leases a fleet of forklift trucks. To secure its equipment during a multi-year customer contract, it negotiates with the lessor an extension of the lease by … years, at the same annual payment of … made at year end, with no additional truck. Before the amendment, … payments remained and the lease liability was … (initial rate …). The incremental borrowing rate at the effective date is …, the implicit rate not being determinable. Determine the modified lease liability and the adjustment to the right-of-use asset (rounded to the nearest euro).CalculationL4Variant
- Mirabel leases … m² of offices. On 1 July 20X4, an amendment allows it to return … m² for the remaining term; the remaining payments are reduced in the same proportion. At that date, the right-of-use asset has a carrying amount of … and the lease liability of …. Case data: the interest rate implicit in the lease cannot be readily determined and Mirabel's incremental borrowing rate at the effective date happens to equal the original rate; Mirabel measures the partial termination in proportion to the area returned (method chosen for the case). Compute the decrease in the right-of-use asset, the modified lease liability and the gain or loss.CalculationL4Variant
- The Coralis printing company leases … identical rotary presses under a single lease. At the end of 20X3, an amendment terminates the lease of … press for the remaining term and reduces the remaining payments proportionately. Just before the amendment, the right-of-use asset is … and the lease liability …. Case data: the implicit rate cannot be determined; Coralis's incremental borrowing rate at the effective date, used as the revised rate, equals the original rate; the partial termination is measured in proportion to the number of presses (method chosen). Compute the decrease in the right-of-use asset and the gain or loss on the modification.CalculationL4Variant
- The Bastide retail chain returns to the lessor, by amendment, … of the sales area of a store for the remaining term, the remaining payments decreasing in the same proportion. Before the amendment, the right-of-use asset is … and the lease liability …. Case data: the revised rate at the effective date equals the original rate, so the liability also decreases by …; the partial termination is measured in proportion to the area (method chosen). Record the modification entry (decrease posted directly to the right-of-use asset account).Journal entryL4Variant
- The caterer Ferrand leases … identical refrigerated trucks under a single lease. An amendment terminates the lease of … truck for the remaining term, with a proportionate decrease in the remaining payments. Just before the amendment, the right-of-use asset amounts to … and the lease liability to …. Case data: the implicit rate cannot be determined; the incremental borrowing rate at the effective date, used as the revised rate, equals the original rate; the partial termination is measured in proportion to the number of trucks (method chosen). Record the entry (decrease posted directly to the right-of-use asset account).Journal entryL4Variant
- The Hélianthe group leases a data centre. An amendment signed in 20X4 adds an adjacent server room for the remaining term and extends the lease by 3 years; the total rent increases, but the increase attributable to the new room is about 20% below the prices observed for comparable rooms, with no particular circumstance of the contract to explain it. Write a memo to the audit committee analysing how Hélianthe should account for this amendment and the documentation to be gathered.JudgmentL4
Covid-19-related rent concessions3 questions
- In 2023, Novalis obtains from its lessor a reduction of the payments due from July to December 2023, presented as a lasting consequence of the Covid-19 pandemic. Novalis may apply the practical expedient for Covid-19-related rent concessions and dispense with assessing whether this concession is a lease modification.True / falseL3
- Historical reminder. In 2021, four lessees of the Brisane group obtained the following rent concessions from their lessors as a direct consequence of the Covid-19 pandemic. Which one met all the conditions of the practical expedient then applicable?Single choiceL3
- Historical reminder. In 2020, the lessee Tamaris obtained a rent concession that met all the conditions of the practical expedient for Covid-19-related rent concessions, and it elected to apply it. Which description of this expedient is accurate?Single choiceL3
Presentation by the lessee10 questions
- Quintal wonders how to present its lease liabilities. Which statement is accurate?Single choiceL2
- The carrier Dunelle does not present its right-of-use assets on a separate line in the statement of financial position. These rights relate to trucks it leases. Where must it include them?Single choiceL2
- The property company Ombrelle leases an office building that it fully subleases to third parties; according to the analysis provided, the corresponding right-of-use asset meets the definition of investment property. How is this right-of-use asset presented in the statement of financial position?Single choiceL2
- Pervenche is preparing its statement of profit or loss and other comprehensive income. Which statements on the presentation of expenses relating to its leases recognised in the statement of financial position are accurate? (several answers)Multiple choiceL2
- Galion pays each year the rent for a warehouse recognised in the statement of financial position. In its statement of cash flows, how does it classify the part of the payment that repays the principal portion of the lease liability?Single choiceL3
- The Hespéride group analyses its lease-related cash outflows for the year. Which payments does it classify within operating activities in its statement of cash flows? (several answers)Multiple choiceL3
- In 20X3, Lunaire paid 120,000 under its leases recognised in the statement of financial position, of which 18,000 relates to interest on the lease liabilities. It also paid 9,000 for exempt short-term leases and 4,000 of variable payments not included in the lease liability. What amount does it present within financing activities for the repayment of the principal of lease liabilities?Single choiceL3
- In Saphir's draft statement of profit or loss, a Lease expenses line of 260,000 combines 205,000 of depreciation of right-of-use assets and 55,000 of interest on lease liabilities. The CFO argues that this presentation is clearer. What correction does the auditor request?Single choiceL3
- Cordial includes its lease liabilities in the Borrowings line and its right-of-use assets in the Property, plant and equipment line, without presenting them on separate lines. What information is missing to comply with IFRS 16?Single choiceL3
- Orphée's controller reviews a checklist on lessee presentation of leases. Which statements are accurate? (several answers)Multiple choiceL3
Disclosures by the lessee15 questions
- Mélèze is preparing the note on its leases as a lessee. Which of the following amounts must it disclose for the period? (several answers)Multiple choiceL2
- The Aubépine group is restructuring the notes to its financial statements. Which statements on the organisation and objective of lessee disclosures are accurate? (several answers)Multiple choiceL2
- The consolidation manager of the Tilleul group proposes presenting the quantitative amounts relating to leases (depreciation, interest, expenses for exempt leases, cash outflows…) as a long narrative paragraph. What does IFRS 16 say?Single choiceL2
- Fougère leases its production lines (a single class of underlying asset). In 20X4, depreciation of the related right-of-use assets amounts to 96,000: 84,000 is recognised as an expense and 12,000 has been included in the production cost of inventories still on hand at the reporting date. What depreciation amount does Fougère disclose for this class in the lease note?Single choiceL3
- The Romarin firm applies the exemptions for short-term leases and leases of low-value assets. In 20X5, the short-term lease expense is 30,000, of which 4,000 relates to short-term leases of low-value assets. The total expense for leases of low-value assets reaches 26,000, including those 4,000. What amount does Romarin disclose as the expense relating to leases of low-value assets?Single choiceL3
- The civil engineering company Garance accounts for its site crane leases under the short-term lease exemption. The expense for the year relates to cranes returned during the year; in December, Garance signed new short-term leases for another site, which commit it for several months of the following year. What additional information must it disclose?Single choiceL3
- Hysope holds, as lessee, a right-of-use asset over a shopping centre that it subleases; according to the analysis provided, this right meets the definition of investment property. What information does Hysope disclose for this right-of-use asset?Single choiceL3
- The hotel group Verveine measures its owned hotels under the IAS 16 revaluation model and, according to the case data, also measures under that model the right-of-use assets over the hotels it leases. What information must it disclose for these revalued right-of-use assets?Single choiceL3
- Valériane is preparing the maturity analysis of its lease liabilities. Which statements are accurate? (several answers)Multiple choiceL3
- Capucine recognises as an expense the payments for its short-term leases and its leases of low-value assets, under the simplified treatment provided by IFRS 16. Which statements on its disclosure obligations are accurate? (several answers)Multiple choiceL3
- The clothing retailer Iris leases 140 stores. For most of them, the rent includes a fixed part and a variable part equal to a percentage of the store's sales; the variable part, not included in the lease liability, represents almost half of the payments made. The current note is limited to the mandatory amounts. Write a recommendation to the CFO on the additional qualitative and quantitative information to be considered.JudgmentL4
- The food group Mimosa leases its fleet of 600 trucks while guaranteeing the lessor a minimum residual value; the fall in the second-hand market increases its exposure. It also signed in November 20X5 a ten-year lease for a new warehouse, whose commencement date is set for March 20X6. Prepare, for the audit committee, a reasoned list of the additional information to be disclosed in the lease note at 31 December 20X5.JudgmentL4
- In 20X4, the Camélia group completed a sale and leaseback transaction on its head office (according to the case data, the transfer is a sale) and recognised a gain in profit or loss. The payments include a significant variable part not included in the lease liability. Which approach to disclosures is most appropriate?Single choiceL4
- Historical reminder. In its 2021 financial statements, the lessee Glycine applied the practical expedient for Covid-19-related rent concessions (applicable only to payments originally due on or before 30 June 2022). What information did it have to disclose in this respect? (several answers)Multiple choiceL3
- The CFO of the Lavande group wishes to add to the lease note two pages describing each significant lease, several items of which already appear in the statement of cash flows and in the note on financial liabilities. The auditor considers this addition of limited use as it stands. Write a reasoned analysis explaining how Lavande should decide which additional information to provide and where to place it.JudgmentL4
Classification of leases by the lessor19 questions
- For a lessor, each lease must be classified in one of two categories only: finance lease or operating lease.True / falseL1
- IFRS 16 requires the lessor to classify as a finance lease any lease whose term covers at least 75% of the economic life of the underlying asset.True / falseL1
- Which criterion leads a lessor to classify a lease as a finance lease rather than an operating lease?Single choiceL1
- When does the lessor classify a lease, and when is that classification reassessed?Single choiceL2
- The lessor Orvalis classified a crane lease as a finance lease. Two years later, without any modification of the lease, it revises upwards the estimated economic life of the crane, so that the lease term no longer covers the major part of it. Orvalis must reclassify the lease as an operating lease.True / falseL2
- Which of the following situations would normally, individually or in combination, lead the lessor to classify a lease as a finance lease?Multiple choiceL2
- Calvenor, a lessor, reviews the clauses of a forklift truck lease. Which clauses are indicators that could also lead to a finance lease?Multiple choiceL2
- To assess the transfer of the risks and rewards incidental to ownership, the lessor distinguishes risks from rewards. Which of the following is a reward rather than a risk?Single choiceL2
- The lessor Tervane leases a hydraulic press whose fair value at the inception date is …. The lessee pays … annual payments of …, in arrears; no residual value is guaranteed. For the classification analysis, Tervane discounts the lease payments at … (case datum). Compute the present value of the lease payments at the inception date, rounded to the nearest euro.CalculationL2Variant
- Lumeria, a lessor, makes available a server rack with a fair value of … at the inception date. The lease provides for … annual payments of …, in advance, the first one at the commencement date. The lessee guarantees to the lessor a residual value of … at the end of the fourth year. The discount rate used for the classification analysis is … (case datum). Compute the present value of the lease payments at the inception date, rounded to the nearest euro.CalculationL3Variant
- The lessor Domaris leases for 25 years a plot of land and the warehouse built on it, for a single annual payment of …. To classify each element separately, Domaris must allocate this payment. At the inception date, the fair value of the leasehold interest in the land is … and that of the leasehold interest in the building is …. Compute the annual share of the payment allocated to the land and the share allocated to the building.CalculationL3Variant
- The property company Belcastre leases out a hotel site made up of land and a building. At the commencement date, the lessee pays a lump-sum upfront payment of …, then an annual payment of …. At the inception date, the fair values of the leasehold interests amount to … for the land and … for the building. Compute the share of the upfront payment and the share of the annual payment allocated to the building.CalculationL4Variant
- Sarvel, a lessor, leases for 40 years a plot of land and the office building constructed on it. The economic life of the building is estimated at 45 years; the land represents a significant share of the value of the whole. The lease provides for neither transfer of ownership nor a purchase option, and the lease payments can be reliably allocated between the two elements. Which classification approach is appropriate?Single choiceL3
- The lessor Quintal leases a plot of land and the factory built on it. Lacking comparable transactions, it cannot reliably allocate the lease payments between the two elements. The analysis of the factory shows finance lease characteristics, and nothing clearly establishes that both elements would be operating leases. How should the lease be classified?Single choiceL3
- The lessor Montrel leases for 4 years a flight simulator whose economic life is estimated at 15 years. At the end of the lease, ownership of the simulator transfers to the lessee for a variable payment equal to the simulator's fair value at that date. The payments over the term cover a small part of the initial fair value, and no other clause transfers any risk or reward to the lessee. Which classification is appropriate?Single choiceL4
- The lessor Altiva designs and leases to the Ferrandis group a test bench configured for its production line only. No other user could use it without major modifications. Altiva keeps legal ownership of the bench. What conclusion should be drawn from this feature?Single choiceL3
- The lessor Pradelle leases a construction machine for 5 years. The lessee may buy it at the end of the lease for 5,000, whereas the expected fair value of the machine at that date is about 60,000. How is this option taken into account in the classification?Single choiceL3
- The accounting manual of the Holdenor group, a lessor of industrial equipment, states: finance lease if the term reaches 75% of the economic life or if the present value of payments reaches 90% of fair value; otherwise operating lease. A new lease has a term equal to 70% of the economic life and a present value equal to 88% of fair value. The lessee bears the lessor's losses if it cancels, and it can extend the lease for 3 years at a rent substantially lower than market. The controller concludes on an operating lease by applying the manual. Write a critical memo on this policy and on the conclusion reached.JudgmentL4
- Brivane, a lessor, classified at the inception date a 7-year lease of a printing press as an operating lease. In the third year: Brivane sharply lowers its estimate of the residual value of the press; the lessee is in difficulty and has paid two instalments late; no clause of the lease has been modified. The chief financial officer proposes to reclassify the lease as a finance lease to reflect the new situation. Give and justify your opinion.JudgmentL4
Finance lease: initial recognition and measurement13 questions
- Cadrix, a lessor with no manufacturing activity, makes a machine available under a lease classified as a finance lease. What does it recognise at the commencement date?Single choiceL2
- The lessor Ostrea determines the lease payments to include in measuring its net investment at the commencement date. Which items, not yet received, are to be included?Multiple choiceL2
- The lessor Sorelia enters into a finance lease of an agricultural tractor. The lessee pays … annual payments of …, in arrears. At the end of the lease, the tractor returns to Sorelia, which expects an unguaranteed residual value of …. The interest rate implicit in the lease is …. Compute the net investment in the lease at the commencement date, rounded to the nearest euro.CalculationL2Variant
- Halvane, a lessor, leases a medical scanner to a clinic under a finance lease. The lease provides for … annual payments of …, in advance; the first one is received at the commencement date. At the end of the lease, the expected residual value of 42,000 is split into a portion guaranteed by the clinic of … and an unguaranteed portion of …. The interest rate implicit in the lease is …. Compute the net investment at the commencement date, after receipt of the first payment, rounded to the nearest euro.CalculationL3Variant
- The lessor Cerizay leases a packaging line with a fair value of …. To conclude the lease, it incurred initial direct costs of … (negotiation and drafting fees). The lessee pays … annual payments of …, in arrears, and Cerizay expects an unguaranteed residual value of …. The interest rate implicit in the lease, which takes the initial direct costs into account, is …. Compute the net investment at the commencement date, rounded to the nearest euro.CalculationL3Variant
- An equipment finance company, Velaris, makes available to a laboratory a spectrometer whose fair value is …. The broker commissions and legal fees directly related to concluding the lease amount to …. The laboratory pays … at the end of each of the … years of the lease; Velaris will then recover the device, whose unguaranteed residual value is estimated at …. The implicit rate, which includes these initial direct costs, is …. What amount of net investment does Velaris recognise at the commencement date (rounded to the euro)?CalculationL3Variant
- Finorama, a lessor that is not a manufacturer, acquired a bottling line, carried on its balance sheet at a carrying amount of …, equal to its fair value. At the commencement date of a finance lease of this line, Finorama pays in cash initial direct costs of …. The present value at the implicit rate of the lease payments and the unguaranteed residual value is …. Record Finorama's entry at the commencement date.Journal entryL3Variant
- The lessor Rivaldi, which is neither a manufacturer nor a dealer, leases a generator whose carrying amount, equal to its fair value, is …. The lessee will make … annual payments of …, in arrears, and has a purchase option of … at the end of the third year, whose exercise is reasonably certain. There are no initial direct costs and no unguaranteed residual value. The implicit interest rate is …. Compute the net investment and record Rivaldi's entry at the commencement date.Journal entryL3Variant
- Novalis, lessee of an office floor, subleases part of it under a sublease classified as a finance lease. The interest rate implicit in the sublease cannot be readily determined. Which solution does IFRS 16 expressly provide for measuring Novalis's net investment?Single choiceL3
- The machine-tool manufacturer Korvo offers its customers a choice between buying and leasing. It enters into a finance lease of a machining centre held in its inventory at a cost of …, whose normal cash selling price, equal to its fair value, is …. The customer makes … annual payments of …, in arrears; Korvo expects an unguaranteed residual value of …. The market rate, which is also the rate in the lease, is …. Compute, rounding each present value to the euro, the revenue, the cost of sales and the selling profit at the commencement date.CalculationL3Variant
- The car dealer Velquin launches a promotional finance lease offer at an advertised rate of …, artificially low, whereas the market rate for this type of customer is …. A van, bought for … and sold for cash at … (fair value), is leased for … annual payments of …, in arrears; ownership transfers to the customer at the end of the lease, with no residual value for Velquin. Compute the revenue and the selling profit to recognise at the commencement date, rounded to the euro.CalculationL4Variant
- The automated truck manufacturer Mirandel leases a truck, held in inventory at a cost of … and whose normal cash selling price (fair value) is …, under a finance lease. The customer makes … annual payments of …, in arrears; Mirandel expects an unguaranteed residual value of …. The market rate, equal to the rate in the lease, is …. Mirandel also paid its salesperson a commission of … to obtain the lease; this commission is already recognised separately. Round each present value to the euro and record the sale entry at the commencement date.Journal entryL4
- The industrial printer manufacturer Ventaris enters into a finance lease with a customer. To obtain this lease, it incurred 3,000 of sales commissions and legal fees. Legal title to the printer will pass to the customer only at the end of the lease. The management accountant proposes to include this 3,000 in the net investment as initial direct costs and to defer the selling profit until title passes. Which position complies with IFRS 16?Single choiceL4
Finance lease: subsequent measurement10 questions
- Orvane, a lessor, has classified a lease of medical equipment as a finance lease. On what pattern does it recognise finance income over the lease term?Single choiceL2
- On 1 January 20X1, Talvio, a lessor, recognises a finance lease of a bottling line. The net investment in the lease amounts to … at that date; the interest rate implicit in the lease is …. The lessee pays an annual lease payment of … on 31 December of each year (in arrears). Compute the finance income for 20X1 and the net investment at 31 December 20X1.CalculationL2Variant
- Meridal, a company financing agricultural equipment, leased a combine harvester under a finance lease on 1 January 20X1. Its net investment in the lease at that date is …, at an interest rate implicit in the lease of …. The customer pays … every 31 December, in arrears. Determine the finance income for 20X2 and the net investment at 31 December 20X2.CalculationL3Variant
- Lanéo entered into a finance lease of a forklift truck as lessor. At 1 January 20X1, its net investment in the lease is …; the interest rate implicit in the lease is …. The lessee pays … on 31 December 20X1 (in arrears). Record the lessor's entries at 31 December 20X1: finance income, then collection of the payment.Journal entryL2Variant
- Rubis Équipements leases scanners to a clinic under a finance lease that commenced on 1 January 20X1. At that date, the net investment was … (implicit rate: …). The clinic pays … at the end of each calendar year. Record Rubis Équipements' entries at 31 December 20X2, the second year of the lease.Journal entryL3Variant
- After the commencement date of a finance lease, which statements about the lessor's accounting are correct? (several answers)Multiple choiceL2
- Hexaline leases industrial presses under finance leases for six years. At the end of the second year, its annual review leads it to lower the estimate of the unguaranteed residual value of one of the presses, which was included in the gross investment. No other term of the contract changes. What treatment must Hexaline apply?Single choiceL3
- On 1 January 20X1, Solvane, a lessor, entered into a three-year finance lease of a welding robot. The lessee makes three annual payments of …, each on 31 December (in arrears). Solvane estimates the unguaranteed residual value of the robot at the end of the lease at …. At the interest rate implicit in the lease of …, the net investment at the commencement date is …. Compute the total finance income to be recognised over the lease term and the finance income for 20X2.CalculationL3Variant
- The fleet lessor Quarzo provides a refrigerated truck to a carrier under a three-year finance lease. Payments of … are made in arrears, at the end of each year. Quarzo uses an unguaranteed residual value of … at the end of the lease. The interest rate implicit in the lease is … and the initial net investment is …. What is the unearned finance income at the commencement date, and what finance income will Quarzo recognise for the third year?CalculationL3Variant
- Grantec, a lessor, has decided to dispose of a portfolio of assets subject to finance leases. It is given that, at the reporting date, this portfolio meets the criteria for classification as held for sale under IFRS 5. Under which requirements does Grantec now account for these assets?Single choiceL2
Finance lease modifications3 questions
- Nordhal, a lessor, leases three laser cutting machines to a manufacturer under a finance lease. During the lease, the parties agree to add a fourth machine; the consideration increases by an amount commensurate with the stand-alone price of this additional machine, adjusted to reflect the circumstances of the contract. How does Nordhal account for this modification?Single choiceL3
- Estrel, a shipowner and lessor, leases a support vessel under a finance lease. On 1 July 20X3, the parties substantially shorten the lease term, without adding any asset. Estrel's documented analysis concludes that, had this modification been in effect at the inception date, the lease would have been classified as an operating lease. Immediately before the effective date of the modification, the net investment amounts to 180,000; the fair value of the vessel is estimated at 210,000. Which treatment complies with IFRS 16?Single choiceL3
- Parvel, a lessor, has leased a tram set to a regional operator under a finance lease. Given the lessee's cash difficulties, the parties reschedule the remaining payments, without changing the scope of the lease or adding any asset. Parvel's team concludes that the lease would in any case have been classified as a finance lease had these new terms been in effect at the inception date. The financial controller proposes remeasuring the receivable as a lessee does for its lease liability. Which position do you defend?Single choiceL4
Operating leases: lessor accounting12 questions
- True or false? A lessor recognises operating lease payments as income on a straight-line basis, unless another systematic basis better reflects how the benefit from using the underlying asset is consumed.True / falseL1
- True or false? During the rent-free period granted at the beginning of an operating lease, the lessor recognises no lease income, since it collects nothing.True / falseL1
- Varenne Logistique leases out part of its refrigerated trucks under operating leases and uses identical trucks itself. How does it determine the depreciation of the leased trucks?Single choiceL2
- The property company Belcour leases out an office floor under an operating lease with a lease term of … years from 1 January 20X1. It grants a rent-free period of … year; thereafter, the lessee pays … a year, at the beginning of each year. Belcour applies the straight-line basis. Compute the annual lease income and the accrued income asset balance at 31 December 20X2.CalculationL2Variant
- A logistics warehouse is leased out by Ombrelle under a five-year operating lease. The lease payments, payable on 1 January of each year, are stepped: … in the first year, … in the second, … in the third, … in the fourth and … in the fifth. No other systematic basis is more representative than the straight-line basis. Determine Ombrelle's annual lease income and the accrued income asset at the end of the second year.CalculationL3Variant
- On 1 January 20X1, Pradelle leases out a shop under an operating lease with a lease term of … months. The first … months are free; thereafter, the lessee pays … a month, at the beginning of each month. Pradelle applies the straight-line basis. Record the summary entry for lease income for 20X1.Journal entryL2Variant
- On 1 January 20X1, Kerlan Matériaux leased a tower crane to a builder under a four-year operating lease. Each year's payment is made on 1 January: … in 20X1, … in 20X2, … in 20X3 and … in 20X4. The straight-line basis is used. Record Kerlan Matériaux's summary lease income entry for 20X3.Journal entryL3Variant
- On 1 January 20X1, Lisandre leases out business premises under an operating lease with a lease term of … years, at a constant payment of … a year payable in advance. It incurs initial direct costs of … to obtain it. Lease income is recognised on a straight-line basis. Compute the 20X1 expense for the initial direct costs and the amount of these costs still included in the carrying amount of the premises at 31 December 20X1.CalculationL2Variant
- On 1 January 20X1, the Asteral group leases out under an operating lease an office building acquired for …, depreciated on a straight-line basis over … years with no residual value, in line with its policy for similar buildings. The lease term is … years, at a constant payment of … a year, payable in advance. Asteral incurred initial direct costs of …. Compute total 20X1 expenses relating to this lease (depreciation of the building and initial direct costs) and the net result of this lease in 20X1.CalculationL3Variant
- For an asset subject to an operating lease, which statements about the lessor's accounting are correct? (several answers)Multiple choiceL2
- The manufacturer Kelso produces industrial compressors, which it sells or leases. It provides a compressor, with a production cost of 60,000 and a normal selling price of 80,000, to a customer under a three-year lease classified (given in the case) as an operating lease. What treatment does Kelso apply at the commencement date?Single choiceL3
- Monteval leases out a cinema complex under an operating lease. Attendance in the sector collapses and the building may have lost value. Under which standard does Monteval determine whether the building itself is impaired and account for any impairment loss?Single choiceL2
Operating lease modifications6 questions
- How does a lessor account for a modification to an operating lease?Single choiceL2
- On 1 January 20X1, Fontaury leased out a hangar under an operating lease for … years: the first year is free, then the lessee pays … at the beginning of each of the following four years. Income is recognised on a straight-line basis. On 1 January 20X3, the parties modify the lease: from that date, the payment is … a year, payable in advance, for a remaining term extended to … years. Compute the accrued income balance at 31 December 20X2 and the annual lease income to be recognised from 1 January 20X3.CalculationL2Variant
- On 1 January 20X1, Altimar leases a fleet of electric bicycles to a local authority under an operating lease for … years. The lessee paid a non-refundable upfront fee of … on signature, then pays … at the beginning of each year. Altimar recognises income on a straight-line basis. On 1 January 20X3, the payment for the four remaining years is reduced to …, payable in advance, with no change in term. Compute the balance of lease payments received in advance at 31 December 20X2 and the annual lease income from 1 January 20X3.CalculationL3Variant
- Dunemer has leased out a storage terminal under an operating lease since 1 January 20X1, for four years, with stepped payments due each 1 January: …, …, … then …. On 1 January 20X3, at the lessee's request, the lease is extended by two years and the payment becomes fixed at … a year, payable in advance, for the four remaining years. Determine accrued income at 31 December 20X2 and the annual lease income of the modified lease.CalculationL2Variant
- The lessor Sorgues has leased out a warehouse under an operating lease. At the beginning of the fourth year, it agrees to a lower payment in exchange for an extension of the lease. At that date, Sorgues' statement of financial position shows accrued income arising from straight-lining. The finance director hesitates between several treatments. Which one complies with IFRS 16?Single choiceL3
- An operating lease of Valcresse is modified with effect from 1 January 20X4. At that date, accrued income from straight-lining the original lease amounts to 12,000. The modified lease provides for four annual payments of 33,000, payable in advance. A team member proposes recognising 33,000 of income a year. What annual lease income should be recognised?Single choiceL3
Presentation by the lessor6 questions
- True or false? The lessor presents underlying assets subject to operating leases in its statement of financial position according to the nature of those assets.True / falseL2
- True or false? Mirabeau, which leases out an office building under an operating lease, presents it in its statement of financial position as a receivable, at the present value of the lease payments still to be received.True / falseL2
- True or false? At the commencement date of a finance lease, the lessor presents assets held under that lease as a receivable at an amount equal to its net investment in the lease.True / falseL2
- Rouvray leases a fleet of mini-excavators, which it continues to own, to construction companies under operating leases. How does it present these machines in its statement of financial position?Single choiceL2
- Dorlane, a lessor, leases a harbour crane under an operating lease and several straddle carriers under finance leases. Which presentation in Dorlane's statement of financial position is correct?Single choiceL2
- True or false? The lessor under a finance lease continues to present the underlying asset within its property, plant and equipment and adds a receivable for the lease payments receivable.True / falseL2
Disclosures by the lessor13 questions
- For its finance leases, which amounts for the period must a lessor disclose under para. 90 of IFRS 16? (several answers)Multiple choiceL2
- Clairval, a lifting equipment rental company, only enters into operating leases of cranes accounted for under IAS 16. Which disclosures must it provide? (several answers)Multiple choiceL2
- The head of consolidation at Bastidane is preparing the note on lease income for the period (selling profit, finance income, lease income). She wonders in which format to present this information. What does IFRS 16 require?Single choiceL2
- For its note on finance leases, Ardenne Crédit has the following data at the reporting date: undiscounted lease payments to be received 500,000; unearned finance income relating to those payments 80,000; discounted unguaranteed residual value 30,000. What net investment amount must the reconciliation show?Single choiceL3
- Ligeria's finance leases generate payments to be received until 20X9, that is over eight years after the reporting date. Which maturity analysis of these payments meets the minimum required by IFRS 16?Single choiceL3
- Beyond the figures, which additional qualitative and quantitative information does IFRS 16 mention as possibly necessary for a lessor? (several answers)Multiple choiceL3
- During the year, Hélion Finance's net investment in its finance leases increased from 2,000,000 to 3,500,000, following the purchase of a portfolio of leases and several early terminations. What specific disclosure does IFRS 16 require in this respect?Single choiceL3
- The Corbières group uses some of its forklift trucks itself and leases out the others under operating leases; it also holds investment property that is leased out. Which statements about its disclosures are correct? (several answers)Multiple choiceL3
- Aérolia, a lessor of regional aircraft under operating leases, provides all the figures required of lessors. However, most of its fleet consists of a single model whose resale value at the end of the leases is highly uncertain, and Aérolia hedges this risk through residual value guarantees negotiated case by case. The finance director considers that the standard's list of disclosures is exhaustive and that nothing needs to be added. Which position do you defend?Single choiceL4
- Reviewing Valdrôme's note on finance leases, you find that it presents, by year, the payments receivable discounted at the implicit rate, whose total equals the net investment in the statement of financial position. No other table is provided. What correction do you require?Single choiceL4
- The Méridienne Équipements group is a lessor of both finance leases (industrial equipment) and operating leases (commercial vehicles). You are preparing the checklist of its disclosures. Which items does it include? (several answers)Multiple choiceL4
- At the reporting date, Pélisse has a single operating lease, of a retail unit, which still runs for eight years at a fixed payment of 10,000 a year, payable at the beginning of each year. Which maturity analysis of undiscounted lease payments to be received meets the minimum required?Single choiceL2
- The property company Rivelune leases out shops under operating leases. Each lease payment has a fixed part indexed annually to a price index and a part equal to a percentage of the lessee's sales above a threshold. In the note on lease income, which income must Rivelune disclose separately?Single choiceL3
Subleases6 questions
- Orvane leases a warehouse for 12 years from an investor (head lease) and subleases part of it to a logistics firm. The head lease is not a short-term lease. By reference to what does Orvane, as intermediate lessor, classify the sublease?Single choiceL3
- Brelin leases an exhibition stand for 9 months and applies to this short-term lease the exemption allowing it to recognise the lease payments as an expense. Throughout this period, it subleases the stand to a young brand. How does Brelin classify the sublease?Single choiceL3
- A restaurant group, Tavira, is the lessee of commercial premises for 15 years and subleases part of them to a franchisee. The head lease is not accounted for under the short-term lease exemption. Which of the following statements on Tavira's classification of the sublease are correct?Multiple choiceL3
- Kelmar is the lessee of an office building for 20 years; the economic life of the building is estimated at 50 years. At the start of year 3, Kelmar subleases the entire building to Doriel for the remaining 18 years of the head lease, without any particular option or guarantee. Kelmar's controller proposes an operating lease, on the grounds that 18 years are only a small part of the 50-year life of the building. Which analysis do you adopt?Single choiceL4
- Nautéa leases a cold-storage warehouse for 10 months. For the class of warehouse assets, it has not elected the short-term lease exemption and therefore recognises a right-of-use asset and a lease liability. It subleases the warehouse to a fish wholesaler for the 10 months. How should Nautéa approach the classification of the sublease?Single choiceL4
- You are preparing the classification file for a sublease granted by Ardoval, the lessee of a production line for 8 years. Which information is relevant for this classification?Multiple choiceL4
Whether the transfer is a sale8 questions
- Pellane sells its head office to an investor and immediately leases it back. To determine whether the transfer of the building is to be accounted for as a sale, which requirements does Pellane refer to?Single choiceL2
- Corvelle transfers a hangar to Stanor and then leases it back from Stanor for 7 years. Which of the following statements correctly describes the scope of the requirements on sale and leaseback transactions?Single choiceL2
- In a three-party arrangement (manufacturer, lessor, lessee) involving industrial equipment, which statements are correct in determining whether there is a sale and leaseback transaction?Multiple choiceL3
- Mirlon wants to use a new press manufactured by Hydrex. Mirlon, Hydrex and the finance company Locafin negotiate together: Locafin will buy the press and lease it to Mirlon for 6 years. For administrative reasons, legal title briefly passes through Mirlon on the delivery date, but Mirlon at no time obtains control of the press before its transfer to Locafin. How does Mirlon account for the arrangement?Single choiceL3
- Fenwald buys a fleet of forklift trucks, puts them into service in its warehouses and operates them for 4 months. It then transfers them to Rentaxis, which leases them back to Fenwald for 5 years. How should the arrangement be characterised?Single choiceL2
- Valtène transfers a data centre to Infrabail and leases it back for 10 years. The contract gives Valtène an option to repurchase the centre. The IFRS 15 analysis provided in the file concludes that, because of this option, control of the centre is not transferred to Infrabail. The finance director nevertheless wishes to recognise a sale, since the deed of transfer has been signed. Which conclusion do you adopt?Single choiceL3
- In the draft note of Aubrac Logistique, a sale and leaseback of a warehouse is presented as a sale on the grounds that the contract is entitled sale agreement and that the buyer-lessor is an independent third party. Which correction of the justification do you propose?Single choiceL3
- The conclusion of the IFRS 15 analysis of a sale and leaseback governs the whole of its subsequent accounting. Which statements about the consequences of that conclusion are correct?Multiple choiceL2
Sale and leaseback: transfer is a sale8 questions
- Granvelle transfers an office building to the investor Pierreval and leases it back for 8 years. According to the IFRS 15 analysis provided, the transfer is a sale. Which of the following statements correctly describes the accounting by both parties?Single choiceL3
- Hestan transfers a warehouse to a property fund for …, equal to the fair value of the warehouse, and leases it back; according to the IFRS 15 analysis provided, the transfer is a sale. The carrying amount of the warehouse is …. The present value of the leaseback payments, payable at the end of each year, is …. Case assumption: the proportion of the right of use retained is measured as the ratio of that present value to the fair value of the warehouse. Compute the right-of-use asset and the gain recognised on the disposal.CalculationL3Variant
- The hotel group Solvène sells a hotel to a property company for …, a price equal to the fair value of the hotel, whose carrying amount is …. The attached IFRS 15 analysis concludes that there is a sale. Solvène leases the hotel back for … years for an annual payment of … paid at the end of each year; the discount rate used is … and the corresponding rounded annuity factor is …. Case assumption: the proportion of the right of use retained is the ratio of the present value of the lease payments to the fair value of the hotel. Determine the lease liability, the right-of-use asset and the gain recognised on the disposal.CalculationL4Variant
- Ombrelle transfers its research centre to an insurer and leases it back for 9 years; the IFRS 15 analysis in the file concludes that the transfer is a sale. The price received, …, equals the fair value of the centre; its carrying amount (presented net in a single account) is …. The present value of the lease payments, payable at the end of each year, is …. Case assumption: the proportion of the right retained is the ratio of that present value to fair value. Record Ombrelle's entry at the transaction date.Journal entryL3Variant
- To finance its growth, the dairy cooperative Brumelac sells its packaging unit to a finance company and continues to operate it under a 6-year lease. Data: sale price …, equal to fair value; carrying amount of the unit … (net, in a single account); present value of the lease payments payable at the end of each year …. The IFRS 15 analysis concludes that there is a sale, and the proportion retained is measured, as an assumption, by the ratio of the present value of the lease payments to fair value. Record the transaction in Brumelac's books.Journal entryL4Variant
- Arvelo sells a business building to Capimmo for … and leases it back; the IFRS 15 analysis concludes that there is a sale. The fair value of the building, readily determinable, is …; its carrying amount is …. Arvelo uses, as the more readily determinable basis, the difference between the fair value of the consideration and that of the building. The contractual lease payments, payable at the end of each year, have a present value of …, part of which repays the excess price (case assumption: its present value equals that excess). The proportion of the right retained is measured, as an assumption, by the ratio of the present value of the payments relating to the lease to fair value. Compute the additional financing, the right-of-use asset and the gain recognised.CalculationL4
- Lusinor transfers a warehouse to an investor for 850,000 and leases it back at below-market lease payments; the IFRS 15 analysis concludes that there is a sale. The fair value of the warehouse, readily determinable, is 1,000,000, and Lusinor uses the difference in fair values as the more readily determinable basis. How should the difference of 150,000 be treated?Single choiceL3
- Calyse carried out a sale and leaseback of a store that qualified as a sale; part of the leaseback payments varies with the store's revenue. A year later, revenue falls and the controller proposes to reduce the lease liability for the now lower variable portion, recognising a gain in profit or loss on the right of use retained. Part of the store is also subject to a partial termination negotiated with the lessor. Which analysis complies with IFRS 16?Single choiceL4
Sale and leaseback: transfer is not a sale6 questions
- Torvale transfers a laboratory and leases it back. According to the IFRS 15 analysis provided, the transfer is not a sale. How does Torvale, the seller-lessee, account for the arrangement?Single choiceL3
- Fidalys bank pays 4,000,000 to a manufacturer to acquire its factory, which the manufacturer immediately leases back. The IFRS 15 analysis concludes that the transfer is not a sale. How does Fidalys, the buyer-lessor, account for the arrangement?Single choiceL3
- Grisol transfers an office building, with a carrying amount of …, to a property company for cash of …, and leases it back for 12 years. According to the IFRS 15 analysis provided, the transfer is not a sale. Record Grisol's entry at the transfer date.Journal entryL3Variant
- The coach operator Alvéo transfers its fleet of 20 coaches to a leasing company for … and continues to operate it under a 4-year lease with a repurchase obligation. The fleet has a carrying amount of … and a fair value of …. The IFRS 15 analysis attached to the file concludes that control of the coaches is not transferred to the leasing company. Which entry does Alvéo record on receipt of the cash?Journal entryL3Variant
- Ostréa's year-end is approaching. During the year it transferred its head office (carrying amount 900,000) for 1,500,000 to an investor and leased it back; the IFRS 15 analysis in the file concludes that the transfer is not a sale. The accountant derecognised the building, recognised a gain of 600,000, then recognised a right-of-use asset and a lease liability. Which correction do you propose?Single choiceL3
- Néphral transfers an automated warehouse (carrying amount 1,400,000) to Bailor for 2,000,000 and leases it back. The IFRS 15 analysis provided to both parties concludes that the transfer is not a sale. Immediately after the transaction, which presentation of the two statements of financial position is correct?Single choiceL3
Transition for lessees3 questions
- Meridia, a lessee, applies IFRS 16 for the first time for the annual period beginning on 1 January 20X1 and presents a comparative period 20X0. It chooses the retrospective method with the cumulative effect of initial application recognised. Which treatment is correct?Single choiceL3
- The Sorelia group, a lessee, applies IFRS 16 under the retrospective method with the cumulative effect at the date of initial application, for a portfolio of contracts previously classified as operating leases. Which of the following are practical expedients that the standard makes available to it?Multiple choiceL4
- Quintal applies IFRS 16 from the annual period beginning on 1 January 20X1, under the cumulative effect retrospective method. A commercial lease previously classified as an operating lease still has 3 annual payments of 100,000, payable at the end of each year. On signing, Quintal paid rent in advance, recognised as an asset at 15,000 at 31 December 20X0. Its incremental borrowing rate is 5% at 1 January 20X1; it was 4% at the original commencement date. For this lease, Quintal elects to measure the right-of-use asset at the amount of the lease liability adjusted by the prepaid lease payments. Which amounts and presentation do you adopt?Single choiceL4