The lease term is the contractual lease term modified by any renewal or termination options that are
Question:
The lease term is the contractual lease term modified by any renewal or termination options that are reasonably certain to be exercised or not exercised. Options whose exercise is under the control of the lessor are automatically included. Lease payments include payments resulting from those options as well as excess guaranteed residual values. The calculation of the present value of lease payments at the beginning of the lease does not include any variable lease payments, unless those payments are “in-substance fixed payments” or if they are based solely on an index or rate.
15. If the option is reasonably certain to be exercised, how does the inclusion of a provision that gives the lessee the option to purchase the lease asset during the lease term at a specified exercise price impact that accounting for that lease? (Select all that apply.) Check All That Apply
a The lessor must classify the lease as a sales-type lease.
b The lessee has the option of classifying the lease as an operating lease.
c The lease term is assumed to end on the date that the option is expected to be exercised.
d In the present value calculations, the lessor adds the present value of the exercise price to the present value of the periodic lease payments to determine the amount recorded as the lease receivable.
e In the present value calculations, the lessee subtracts the present value of the exercise price from the present value of the periodic lease payments to determine the amount recorded as the lease liability.
Intermediate Accounting
ISBN: 978-1260481952
10th edition
Authors: J. David Spiceland, James Sepe , Mark Nelson, Wayne Thomas