Leasing

What is the definition of a 'lease' according to the ITA?

• A hire purchase agreement

• Any agreement for a lease or a sub-lease

• A tenancy for more than three years

• A sub-lease only

What is the difference between a lease and a hire purchase?

• In a lease, the lessor is entitled to claim capital allowances, while in a hire purchase, the buyer is not entitled to claim capital allowances

• In a lease, the lessee has the option to purchase the asset, while in a hire purchase, the buyer is deemed to be the owner of the asset

• In a lease, the lessee is deemed to be the owner of the asset, while in a hire purchase, the seller is the owner of the asset

• There is no difference between a lease and a hire purchase

What is the tax treatment for a lease transaction in terms of recognition of gross income for the lessor?

• The lessor is not required to recognize any gross income for a lease transaction

• The amount to be recognized as gross income is the total lease rentals receivable

• The amount to be recognized as gross income is the deposit and the capital portion of instalments received

• The amount to be recognized as gross income is the interest portion of the instalments received

In a hire purchase transaction, what is the tax treatment for the seller in terms of recognition of gross income?

• The seller will recognize the interest portion of the instalments received as revenue

• The seller will recognize the deposit and the capital portion of instalments received as revenue

• The seller is not required to recognize any gross income for a hire purchase transaction

• The seller will recognize the entire sale value as revenue

What is the basis of apportionment for common expenses and capital allowances on common assets in leasing and non-leasing activities?

• Based on the ratio of lease debtors/assets to loan/advances

• Based on the ratio of lease rental receivable to gross income from other sources

• All of the above

• Based on the ratio of lease income as reported in the accounts to gross income from other business sources

Under what situation will a lease transaction be deemed to be a sale transaction?

• Lessee acquires

  the leased asset

  at below the

  market value

• All of the above

• Lessee is given

  the ‘beneficial

  ownership’ of

  the leased asset

• A ‘sale and

  leaseback’

  arrangement

What is the tax treatment for the lessor in a deemed sale transaction?

• The lessor will recognize the interest portion of the lease rentals received as revenue

• The lessor is not required to recognize any gross income for a deemed sale transaction

• The lessor is entitled to claim capital allowances on the asset

• The lessor will recognize the entire sale value as revenue

What is the tax treatment for the lessee in a deemed sale transaction?

• The lessee will recognize the entire sale value as revenue

• The lessee can claim capital allowances on the assets

• The lessee is not entitled to claim any tax deduction in a deemed sale transaction

• The lessee can claim tax deduction on the lease rentals incurred

What is the accounting treatment for the lessor under MFRS 16?

• The lessor is not required to classify the lease as a finance lease or an operating lease

• The lessor will present operating lease assets according to the nature of the assets and recognize the lease income on a straight-line basis

• The lessor will recognize assets held under a finance lease and present the assets as a receivable

• The lessor will recognize an asset in its Statement of Financial Position in the form of 'right-of-use' assets

What is the tax treatment for the lessor in a lease transaction?

• The lessor is not required to recognize any gross income for a lease transaction

• The lessor is entitled to claim capital allowances on the asset

• The lessor will recognize the entire sale value as revenue

• The lessor will recognize the interest portion of the lease rentals received as revenue