Certificate in International Financial Reporting Leases, Provisions, and Employee Benefits 1

Question 1

Under IFRS 16, how does a lessee recognise most leases on its balance sheet at commencement?

Accepted Answer

As a right-of-use asset and a corresponding lease liability

Answer

IFRS 16 requires lessees to recognise a right-of-use asset and lease liability for virtually all leases.

Question 2

Which of the following is an exemption under IFRS 16 that allows a lessee to expense lease payments straight-line?

Accepted Answer

Short-term leases (12 months or less) and low-value asset leases

Answer

IFRS 16 permits the short-term and low-value exemptions which allow straight-line lease expense treatment.

Question 3

Under IAS 37, a provision should be recognised when:

Accepted Answer

There is a present obligation, it is probable an outflow will be required, and the amount can be reliably estimated

Answer

All three criteria—present obligation, probable outflow, and reliable estimate—must be met for a provision.

Question 4

Under IAS 37, a contingent liability is:

Accepted Answer

Disclosed in the notes but not recognised in the financial statements

Answer

A contingent liability is disclosed rather than recognised because the outflow is possible but not probable.

Question 5

Under IAS 19, a defined benefit obligation is measured using:

Accepted Answer

The projected unit credit method

Answer

IAS 19 requires the projected unit credit actuarial method to measure defined benefit obligations.

Certificate in International Financial Reporting Practice Test