ExpertEasy1 markMultiple Choice
CPA · Question 46 · Area III: Select Transactions
Under ASC 842, a lessee may elect not to recognize a Right-of-Use (ROU) asset and Lease Liability for which type of lease?
Under ASC 842, a lessee may elect not to recognize a Right-of-Use (ROU) asset and Lease Liability for which type of lease?
Answer options:
A.
Short-term leases (12 months or less) with no purchase option reasonably certain to be exercised.
B.
Operating leases.
C.
Leases of low-value assets.
D.
Finance leases.
How to approach this question
Recall the practical expedients/exemptions. US GAAP allows an exemption for Short-Term Leases (<12 months).
Full Answer
A.Short-term leases (12 months or less) with no purchase option reasonably certain to be exercised.✓ Correct
A
Lessees can elect not to recognize ROU assets and liabilities for short-term leases (lease term 12 months or less) that do not include a purchase option reasonably certain to be exercised.
Common mistakes
Confusing US GAAP (Short-term only) with IFRS (Short-term AND Low-value).
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