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    Question

    A leased asset should be depreciated over

    the
    A Shorter of the lease term and the asset’s useful life Correct Answer Incorrect Answer
    B Longer of the lease term and the asset’s useful life Correct Answer Incorrect Answer
    C Entire lease term Correct Answer Incorrect Answer
    D Useful life of the asset Correct Answer Incorrect Answer
    E Any of the above as per the policy of the lessee company Correct Answer Incorrect Answer

    Solution

    The depreciation policy for assets held under finance leases is consistent with that for owned assets. If there is no reasonable certainty that the lessee will obtain ownership at the end of the lease then the asset is to be depreciated over the shorter of the lease term or the life of the asset.

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