Certificate in International Financial Reporting Leases, Provisions, and Employee Benefits 2

Question 1

Under IFRS 16, the lease liability is initially measured at:

Accepted Answer

The present value of future lease payments not paid at commencement

Answer

IFRS 16 requires discounting future lease payments using the rate implicit in the lease or the incremental borrowing rate.

Question 2

Under IAS 37, how should a provision be measured?

Accepted Answer

At the best estimate of the expenditure required to settle the obligation

Answer

IAS 37 requires provisions to be measured at management's best estimate of the amount needed to settle.

Question 3

Under IAS 37, an onerous contract provision is required when:

Accepted Answer

The unavoidable costs of the contract exceed the expected economic benefits

Answer

IAS 37 defines an onerous contract as one where unavoidable costs exceed the benefits receivable.

Question 4

Under IAS 19, the net interest cost on a defined benefit plan is calculated as:

Accepted Answer

Net defined benefit liability × discount rate

Answer

Net interest is the discount rate applied to the net defined benefit liability (or asset) at the start of the period.

Question 5

Under IFRS 16, a lessor classifies leases as finance or operating based on:

Accepted Answer

Whether substantially all the risks and rewards of ownership are transferred to the lessee

Answer

Lessors still apply the risks-and-rewards test under IFRS 16 to classify leases.

Certificate in International Financial Reporting Practice Test