AI for Lease Accounting (ASC 842) Quiz

Answers and explanations appear as you take the quiz.

1. Under ASC 842, which leases can a lessee leave off the balance sheet under the short-term lease election?
   • Any lease with monthly payments under $5,000
   • Leases of 12 months or less with no purchase option the lessee is reasonably certain to exercise
   • All operating leases
   • Leases signed before the company adopted ASC 842
2. A store lease has rent that rises each year with CPI. How is this handled in the initial lease liability?
   • Payments are measured using the index at commencement, and later changes are expensed as variable payments
   • All future CPI increases are forecast and included
   • CPI-linked rent is excluded from the liability entirely
   • The lease is automatically classified as a finance lease
3. Why does the guide say accurate AI extraction does not by itself make lease accounting compliant?
   • ASC 842 does not allow electronic records
   • AI can only read leases written in English
   • Whether a renewal option is reasonably certain to be exercised depends on economic factors that are not written in the lease
   • Extraction is only needed for finance leases
4. Which discount rate option does ASC 842 allow private companies to elect?
   • The company's weighted average cost of capital
   • The prime rate on the commencement date
   • The historical inflation rate
   • A risk-free rate
5. Which situation is an example of a possible embedded lease that AI can help flag?
   • A logistics contract that gives the customer dedicated, specified trucks it controls
   • An office supply purchase order
   • A marketing agency retainer
   • A one-time software license fee
6. According to the guide, which validation step caught an AI miss of a three-month rent abatement in an addendum?
   • Asking the AI to reread the lease
   • Checking the lease against IFRS 16
   • Comparing the extracted rent schedule with the accounts payable payment history
   • Recalculating the discount rate
7. Under ASC 842, what expense pattern does an operating lease generally produce for a lessee?
   • Front-loaded interest plus amortization
   • No expense until the lease ends
   • Expense equal to cash paid each month, whatever the schedule
   • A single lease cost recognized generally on a straight-line basis
8. Why should every AI-extracted lease field carry a citation to its page and clause?
   • So a reviewer or auditor can quickly check the value against the source document
   • Because ASC 842 requires citations to be printed in the footnotes
   • So the AI can use the citations to calculate present value
   • To shorten the lease abstract