A company signs a lease that results in a $200 Operating Lease Asset and a $200 Operating Lease Liability appearing on its Balance Sheet. Its fixed annual cash rental payment is $25 per year, and it uses a Discount Rate of 6% for this lease, which has a term of 10 years.After one (1) year passes, how will this company’s Total Assets DIFFER under the U.S. GAAP vs. IFRS treatments of Operating Leases? Assume a 25% tax rate.a. They’ll be the same because under both accounting systems, the Operating Lease Asset for a single lease decreases by the same amount each year.b. Under IFRS, Total Assets will be lower by $5.c. Under IFRS, Total Assets will be lower by $3.d. Under IFRS, Total Assets will be lower by $1.
A company signs a lease that results in a $200 Operating Lease Asset and a $200 Operating Lease Liability appearing on its Balance Sheet. Its fixed annual cash rental payment is $25 per year, and it uses a Discount Rate of 6% for this lease, which has a term of 10 years.After one (1) year passes, how will this company’s Total Assets DIFFER under the U.S. GAAP vs. IFRS treatments of Operating Leases? Assume a 25% tax rate.a. They’ll be the same because under both accounting systems, the Operating Lease Asset for a single lease decreases by the same amount each year.b. Under IFRS, Total Assets will be lower by $5.c. Under IFRS, Total Assets will be lower by $3.d. Under IFRS, Total Assets will be lower by $1.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
A company signs a lease that results in a $200 Operating Lease Asset and a $200 Operating
Lease Liability appearing on its
per year, and it uses a Discount Rate of 6% for this lease, which has a term of 10 years.
After one (1) year passes, how will this company’s Total Assets DIFFER under the U.S. GAAP
vs. IFRS treatments of Operating Leases? Assume a 25% tax rate.
a. They’ll be the same because under both accounting systems, the Operating Lease
Asset for a single lease decreases by the same amount each year.
b. Under IFRS, Total Assets will be lower by $5.
c. Under IFRS, Total Assets will be lower by $3.
d. Under IFRS, Total Assets will be lower by $1.
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