CIMA Exam CIMAPRA19-F02-1 Topic 5 Question 105 Discussion

Actual exam question for CIMA's CIMAPRA19-F02-1 exam

Question #: 105
Topic #: 5

UV entered into a five year non-cancellable operating lease for an asset two years ago. Lease payments are settled annually in arrears.

At the year end, UV no longer requires this leased asset as they have decided to discontinue the product line that itwas used for.

At this date UV had made two out of the five lease payments.

Which of the following statements about the unavoidable lease payments is true in accordance with IAS 37 Provisions, Contingent Liabilities and Assets?

AA provision should be recognised for the unavoidable lease payments with a corresponding charge to profit or loss.

BA provision should be recognised for the unavoidable lease payments with a corresponding charge to other comprehensive income.

CThe amount of the unavoidable lease payments should be disclosed in the financial statements with no corresponding accounting entry.

DThe amount of the unavoidable lease payments should be ignored in the financial statements.

Show Suggested Answer

Suggested Answer: A

by Ezekiel at Jan 13, 2025, 07:49 AM

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Ettie

2 days ago

Haha, I bet the answer is D - just ignore the lease payments and hope the examiner doesn't notice. That's the easiest solution, right?

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Shanda

11 days ago

I'm not sure about this one. Could it be B? Recognizing the provision in other comprehensive income might be more appropriate since it's not directly related to the current operations.

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Quentin

2 days ago

I think A is the correct option. Recognizing the provision in profit or loss seems more appropriate in this case.

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I think the correct answer is A. A provision should be recognised for the unavoidable lease payments, as UV is legally bound to make the remaining lease payments even though they no longer require the asset. Charging this to profit or loss seems appropriate.

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Barabara

27 days ago

I'm not sure about option B. Recognizing the provision in other comprehensive income doesn't seem appropriate in this situation.

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Jessenia

1 months ago

I agree with Tammara. It makes sense to recognize the provision for the lease payments that UV is obligated to make.

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Tammara

1 months ago

I think option A is correct. A provision should be recognized for the unavoidable lease payments with a corresponding charge to profit or loss.

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CIMA Exam CIMAPRA19-F02-1 Topic 5 Question 105 Discussion

Contribute your Thoughts:

Ettie

Shanda

Quentin

Lashawnda

Barabara

Jessenia

Tammara