Leases, Provisions, and Employee Benefits Flashcards

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

Answer: The present value of future lease payments not paid at commencement

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

Under IAS 37, how should a provision be measured?

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

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

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

Answer: The unavoidable costs of the contract exceed the expected economic benefits

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

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

Answer: Net defined benefit liability × discount rate

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

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

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

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

Under IAS 37, a restructuring provision can be recognised only when:

Answer: A detailed formal plan exists and the entity has raised a valid expectation in those affected

IAS 37 requires both a detailed formal plan and communication that raises valid expectation before a provision is allowed.