Which one of the following statements is true regarding the reassessment of lease classification in the event of a modification?
Lessors do not reassess lease classifications after initial assessment
Lease modifications that give rise to separate leases would be reassessed for lease classification
Changes in the residual value of the underlying asset do not give rise to a new classification of a lease for accounting purposes
Changes in the estimated economic life at any point during the life of the lease give rise to a new classification of a lease for accounting purposes
According to the accounting standards, changes in the residual value of the underlying asset do not give rise to a new classification of a lease for accounting purposes. Therefore, statement C is true. Lessors are not required to reassess lease classifications after the initial assessment, unless there's a modification that results in a lease being separated into distinct leases, in which case each resulting lease component would need to be classified separately. However, modifications due to changes in the residual value of the leased asset do not typically lead to a reclassification of the lease.
