1Z0-1080-25 practice question 12 of 25

In Capital, which three statements are true when performing lease asset planning using the IFRS 16 and ASC 842 standards?

Answer options

A: To determine if a lease asset is a low value asset, the value of the asset is calculated as Lease Payment multiplied by Payment Frequency. Correct answer

B: If the calculated value of the asset is less than or equal to the Low Value Lease Amount, the asset is considered to be a low value lease asset. Correct answer

C: Once assigned, you cannot override the Low Value Lease Amount for an asset.

D: Lessees are required to recognize assets or liabilities for leases of low value assets, such as tablets, personal computers, small items of office furniture, and telephones.

E: You can override the Low Value Lease Amount for an asset, forcing the asset to be calculated as a low value lease asset. Correct answer

Correct Answer:

A. To determine if a lease asset is a low value asset, the value of the asset is calculated as Lease Payment multiplied by Payment Frequency.; B. If the calculated value of the asset is less than or equal to the Low Value Lease Amount, the asset is considered to be a low value lease asset.; E. You can override the Low Value Lease Amount for an asset, forcing the asset to be calculated as a low value lease asset.

Explanation

According to Oracle's documentation for the Capital module, the system determines if a lease asset qualifies as low value using a specific process. First, it calculates a value by multiplying the 'Lease Payment' by the 'Payment Frequency' (A). This calculated value is then compared against a pre-configured threshold, the 'Low Value Lease Amount'. If the calculated value is less than or equal to this threshold, the asset is classified as a low value lease asset (B). Furthermore, the documentation confirms that planners have the ability to manually override the system's classification by setting the 'Low Value Lease property', thereby forcing an asset to be treated as a low value lease, which is the functionality described in (E).

Why Incorrect

C: This is incorrect. While the configured threshold amount is not changed per asset, the resulting low value classification can be overridden, which is a key system feature described in the documentation. D: This misrepresents the IFRS 16 standard. The standard provides an exemption that permits lessees to not recognize a right-of-use asset and lease liability for low-value leases.

References

1. Oracle Enterprise Performance Management Cloud

Administering Capital

Release 24.05

"Adding and Working with Lease Assets."

This section states

"The value of the asset is calculated as Lease Payment Payment Frequency. If the calculated value of the asset is less than or equal to the Low Value Lease Amount defined on the Capital Configuration page

the asset is considered to be a low value lease asset. You can override the Low Value Lease property for an asset

forcing the asset to be calculated as a low value lease asset." This single source directly validates answers A

and E

and invalidates C.

2. International Accounting Standards Board (IASB)

"IFRS 16 Leases

" January 2016.

Paragraphs B3-B8

"Leases of low-value assets

" detail the recognition exemption for lessees. Paragraph 6 states

"a lessee may elect not to apply the requirements in paragraphs 22–45 to... leases for which the underlying asset is of low value". This confirms that recognition is not required

making option D incorrect.

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