Question

1. Which of the following is a reason why lease accounting under U.S. GAAP and IFRS were revised?

• It was too easy for firms to circumvent lease capitalization criteria.

• To enhance comparability for analyzing different companies’ financial statements.

• Operating leases were a popular means of off-balance sheet financing.

• All of these answer choices are correct.

2. A temporary difference that causes book income to be greater than or less than taxable income when it is initially recorded is a/an:

Multiple Choice

• reversing temporary difference.

• originating temporary difference.

• permanent difference.

• minor difference.

3. The net pension liability that must be shown on the balance sheet of the plan sponsor is the:

Multiple Choice

• accumulated benefit obligation.

• projected benefit obligation.

• excess of the accumulated benefit obligation over the plan assets at fair value.

• excess of the projected benefit obligation over the fair value of plan assets.

Answer 1

1) All of these answer choices are correct.

(

• It was too easy for firms to circumvent lease capitalization criteria.

• To enhance comparability for analyzing different companies’ financial statements.

• Operating leases were a popular means of off-balance sheet financing.)

2) originating temporary difference.

3) excess of the projected benefit obligation over the fair value of plan assets

Reason:An employer needs to recognize the over or under funded status of its pension plan. A liability needs to be reported when the fair value of the plan assets is less than the projected benefit obligation.