Adams Storage and Appraisal leased equipment to OAC Corporation for an eight-year period, at which time possession of the leased asset will revert back to Adams. The equipment cost Adams $32 million and has an expected useful life of 11 years. Its normal sales price is $45 million. The present value of the minimum lease payments for both the lessor and lessee is $40 million. The first payment was made at the inception of the lease. How would OAC classify this lease if it prepares its financial statements using IFRS? Why?

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Asked Jan 28, 2020
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Adams Storage and Appraisal leased equipment to OAC Corporation for an eight-year period, at which time possession of the leased asset will revert back to Adams. The equipment cost Adams $32 million and has an expected useful life of 11 years. Its normal sales price is $45 million. The present value of the minimum lease payments for both the lessor and lessee is $40 million. The first payment was made at the inception of the lease. How would OAC classify this lease if it prepares its financial statements using IFRS? Why?

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