Which factor would contribute toward the lessor classifying

Which factor would contribute toward the lessor classifying a lease as a financial lease? A) Lessor retains risk of breakage to leased asset. B) Lessor has reward of high resale value. C) Lessor does not have risk of change in demand for the leased asset. D) Lessor does not have guaranteed residual value. 1.7 ??: Which statement is true? A) IAS 12 states the following: Deferred tax assets and liabilities shall be discounted. B) Enterprises are expected to keep very detailed scheduling of the timing of the reversal of each temporary difference. C) To permit, but not require discounting would result in deferred tax assets and liabilities which would be comparable between entities D) The rationale for not discounting is based on considerations of costs and benefits as well as comparability among enterprises 1.8 Which accurately describes the purpose of the taxes payable method? A) It represents the amount of income recognized for accounting purposes. B) It represents the amount of income recognized for tax purposes. C) It calculates tax expense based on the accounting income before tax. D) It calculates tax expense based on the amount payable to tax authorities. 1.9

Solution

Since, multiple questions have been posted, I have answered the first 1 with relevant explanation.

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Question 1.7

Lessor does not have risk of change in demand for leased asset. (which is Option C)

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Explanation:

Option A is incorrect because all the risks and rewards associated with the leased asset are transferred to the lessee. This holds true, irrespective of whether the actual ownership gets transferred to the lessee at the termination of lease or not.

Option B is incorrect because the lessor is not entitled to receive a high resale value at the expiry of lease. The price at which the leased asset may be bought by the lessee may be substantially less than the fair value (this clause is known as bargain purchase option). For a lease to be classified as a finance lease, there has to be a bargain purchase option clause in the lease agreement.

Option C is correct because all the risks and returns associated with the change in the valuation of the underlying asset get transferred to the lessee. Therefore, lessor doesn\'t have any risk of change in demand for the leased asset.

Option D is incorrect. A lease is classified as a capital lease if the present value of sum of lease payments and any residual value guaranteed by the lessee is either equals to or exceeds the fair value of the leased asset. Therefore, the lessor may have guaranteed residual value.