GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Finance Lease
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Operating Lease
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Economic Lease
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Sale and leaseback
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Detailed explanation-1: -Definition: Capital lease is a lease agreement in which the lessor agrees to transfer the ownership rights to the lessee after the completion of the lease period. Capital or finance leases are long term and non cancellable in nature.
Detailed explanation-2: -(a) the non-cancellable period of a lease is any period during which the lessee is unable to terminate the contract (paragraph B35 of IFRS 16). Consequently, any non-cancellable period in effect sets a minimum lease term.
Detailed explanation-3: -The customer is committed to paying these rentals over this period and, technically, a finance lease is defined as non-cancellable although it may be possible to terminate early.
Detailed explanation-4: -An operating lease is a lease other than a finance lease. A non-cancellable lease is a lease that is cancellable only: (a) upon the occurrence of some remote contingency; (b) with the permission of the lessor; (c) if the lessee enters into a new lease for the same or an equivalent asset.