{"id":248267,"date":"2025-07-08T09:21:56","date_gmt":"2025-07-08T09:21:56","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=248267"},"modified":"2025-07-08T09:21:58","modified_gmt":"2025-07-08T09:21:58","slug":"which-of-the-following-shall-a-lessee-recognize-at-the-commencement-date","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/07\/08\/which-of-the-following-shall-a-lessee-recognize-at-the-commencement-date\/","title":{"rendered":"Which of the following shall a lessee recognize at the commencement date"},"content":{"rendered":"\n<p>Which of the following shall a lessee recognize at the commencement date? A. A right-of-use asset B. A lease liability C. Deferred income D. A and B 1. A 2. B 3. C 4. D<\/p>\n\n\n\n<p><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-1-color\">The Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n\n\n\n<p>The correct answer is <strong>D. A and B<\/strong>.<\/p>\n\n\n\n<p>At the commencement date of a lease, a lessee is required to recognize <strong>both a right-of-use (ROU) asset and a lease liability<\/strong>. This is in accordance with the new lease accounting standards introduced under <strong>IFRS 16<\/strong> (International Financial Reporting Standards) and <strong>ASC 842<\/strong> (under US GAAP). Let&#8217;s break down both elements:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Right-of-use asset<\/strong>:\n<ul class=\"wp-block-list\">\n<li>This represents the lessee\u2019s right to use the underlying asset over the lease term.<\/li>\n\n\n\n<li>The ROU asset is initially recognized at the amount of the lease liability adjusted for any prepayments, initial direct costs, or incentives received.<\/li>\n\n\n\n<li>It reflects the value of the asset the lessee controls during the lease period.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Lease liability<\/strong>:\n<ul class=\"wp-block-list\">\n<li>The lease liability is the present value of the lease payments that the lessee is obligated to make over the lease term.<\/li>\n\n\n\n<li>This liability is calculated by discounting future lease payments to the commencement date using the lease&#8217;s interest rate, or if not readily determinable, the lessee&#8217;s incremental borrowing rate.<\/li>\n\n\n\n<li>The lease liability represents the lessee\u2019s obligation to make lease payments for the right to use the leased asset.<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n\n\n\n<p>These two components (ROU asset and lease liability) are the primary recognition requirements at the commencement date of the lease. Deferred income (option <strong>C<\/strong>) would typically arise in scenarios where a lessor provides incentives or discounts, but it is not a requirement for lessees at the commencement of the lease.<\/p>\n\n\n\n<p>Thus, <strong>D (A and B)<\/strong> is the correct choice as it correctly identifies the lessee\u2019s obligations to recognize both the ROU asset and the lease liability.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" src=\"https:\/\/learnexams.com\/blog\/wp-content\/uploads\/2025\/07\/learnexams-banner8-190.jpeg\" alt=\"\" class=\"wp-image-248268\"\/><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>Which of the following shall a lessee recognize at the commencement date? A. A right-of-use asset B. A lease liability C. Deferred income D. A and B 1. A 2. B 3. C 4. D The Correct Answer and Explanation is: The correct answer is D. A and B. At the commencement date of a [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-248267","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/248267","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=248267"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/248267\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=248267"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=248267"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=248267"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}