When recording a capital lease (called a finance lease under IFRS) Blue Company is aware that the implicit interest rate used by the Gray Company, the lessor, to calculate lease payments is 7%. Blue's incremental borrowing rate is 6%. Blue should record the leased asset and lease liability at the present value of the lease payments discounted at:
A) 7% if using IFRS.
B) 6% if using IFRS.
C) 6% if using either U.S. GAAP or IFRS.
D) 7% if using U.S. GAAP.
Answer: A
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