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Kano Textiles Plc is evaluating a finance lease versus an operating lease for a ₦80,000,000 weaving machine. Under IFRS 16, which statement correctly distinguishes the financial reporting impact of a finance lease on the lessee's statement of financial position?

AThe lessee recognises neither an asset nor a liability, expensing lease payments as incurred
BThe lessee recognises a right-of-use asset and a corresponding lease liability at the present value of future lease paymentsCORRECT
CThe lessee recognises only a lease liability equal to the total undiscounted lease payments
DThe lessee recognises a right-of-use asset at fair value with no corresponding liability
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Why the answer is B, and why the others tempt you.
IFRS 16 requires a lessee to recognise a right-of-use (ROU) asset and a lease liability measured at the present value of lease payments not yet made at the commencement date. This applies to all leases (except short-term and low-value asset exemptions), eliminating the old distinction between finance and operating leases for lessees. Options A, C, and D misstate the IFRS 16 measurement requirements.
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