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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Vanda

1 months ago

Wait, we're supposed to actually read the accounting standards? I thought this was a multiple-choice exam, not a research project!

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Katheryn

1 months ago

I'm pretty sure the correct answer is C. Disclose the amount in the financial statements, but don't bother with any accounting entries. That way, you can just show the liability and move on.

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Nathalie

1 days ago

I disagree, I believe the answer is C. We should disclose the amount in the financial statements without any accounting entry.

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Gretchen

9 days ago

I think the correct answer is A. We should recognize a provision for the unavoidable lease payments with a charge to profit or loss.

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Ettie

2 months 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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Kallie

10 days ago

User 3: Yeah, ignoring the lease payments would not be a good idea. We need to be transparent in our financial statements.

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Gerald

1 months ago

User 2: I agree with Gerald. We should follow the accounting standards and recognize a provision for the unavoidable lease payments.

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Susy

1 months ago

User 1: No way, that's not the right approach. We can't just ignore the lease payments.

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Shanda

2 months 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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Shannon

1 months ago

I see your point, but I still believe that recognizing the provision in profit or loss is the most appropriate treatment.

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Tresa

1 months ago

I'm not sure about that. I still think B could be a valid option considering the nature of the lease payments.

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Levi

1 months ago

I agree with you. Option A makes more sense because it directly impacts the profit or loss.

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Quentin

2 months 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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Farrah

1 months ago

Yes, UV is legally obligated to make the remaining lease payments, so it makes sense to recognize it as a provision in the financial statements.

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Kerry

1 months ago

I agree with you, option A is the correct answer. UV should recognize a provision for the unavoidable lease payments.

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Barabara

2 months 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

3 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

3 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:

Vanda

Katheryn

Nathalie

Gretchen

Ettie

Kallie

Gerald

Susy

Shanda

Shannon

Tresa

Levi

Quentin

Lashawnda

Farrah

Kerry

Barabara

Jessenia

Tammara