Long-term Liabilities and Equities

Which of the following is least likely an objective of the IAS 19 disclosures regarding defined benefit plans?

• Explain the characteristics and risks of the firm’s defined benefit plan.

• Identify amounts in the financial statements relating to defined benefit plans.

• Describe how defined benefit plans affect amounts, timings, and uncertainties relating to future net income.

The least likely reason for a corporation to lease rather than buy a fixed asset is to:

• benefit from appreciation in the asset’s value.

• conserve cash at lease inception.

• decrease its financing costs.

ABC Company leases manufacturing equipment for five years with annual payments of $20,000. The company will return the equipment to the lessor at the end of the lease. The term of the lease is equal to the equipment's useful life. Under U.S. GAAP, the company will:

• report the lease as an operating lease.

• record a right-of-use asset on the balance sheet.

• recognize an amortization expense equal to the principal repayment each period.

A lessor who enters into a finance lease is least likely to:

• add an asset to her balance sheet.

• amortize a receivable.

• record a profit.

The difference between the fair value of a defined benefit pension plan's assets and its estimated benefit obligation is recognized:

• as an actuarial adjustment in other comprehensive income.

• on the balance sheet as a net pension asset or liability.

• on the income statement as pension expense.

For an operating lease, the lessor must disclose:

• interest recognized in the income statement relating to the lease receivable asset.

• impairments of the leased asset.

• selling profit or loss on derecognition of the leased asset.

For an operating lease, the leased physical asset appears on the balance sheet of:

• neither the lessor nor the lessee.

• the lessor.

• the lessee.

When a lessee recognizes a balance sheet asset and liability for a new lease:

• the liability is typically greater than the asset.

• the asset and liability are equal.

• the asset is typically greater than the liability.

An airline leases a new airplane from its manufacturer for 10 years. For financial reporting, the airline must record an asset and a liability on its balance sheet:

• only if the lease is a finance lease.

• only if the lease is an operating lease.

• regardless of whether the lease is a finance or operating lease.

Which of the following regarding employer contributions is least likely a required disclosure under IFRS?

• Expected employer contributions for the next period for defined benefit plans.

• Total employer’s contributions expensed in the income statement for defined contribution plans.

• Reasons for changes in employer contributions for defined contribution plans.