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CMA Intermediate · Financial Accounting · Property, Plant and Equipment (AS 10)

Under AS 10, how is the cost of an item of PPE held by a lessee under a finance lease determined?

The cost of PPE held by a lessee under a finance lease is determined in accordance with AS 19, Leases. AS 10 refers to that standard for this measurement rather than to AS 16, AS 12 or the lessor's purchase price.

  1. AIn accordance with AS 19, LeasesCorrect
  2. BIn accordance with AS 16, Borrowing Costs
  3. CIn accordance with AS 12, Accounting for Government Grants
  4. DAt the lessor's original purchase price in all cases

Explanation

AS 10 states that the cost of an item of PPE held by a lessee under a finance lease is determined in accordance with AS 19, Leases. AS 16 and AS 12 deal with other matters, and the lessor's price is not prescribed as the basis.

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