Mastering Lease Classification
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Which of the following situations would normally lead to a lease being classified as a finance lease at the inception date?

  • The lessee has the option to purchase the leased asset, and it is reasonably certain that the option will be exercised.
  • The lease term is for a major part of the economic life of the asset, even if title is not transferred. (correct)
  • The lease transfers ownership to the lessee by the end of the lease term.
  • The present value of lease payments to be received by the lessor is equal to the fair value of the leased asset.

    • Which of the following indicators could lead to a lease being classified as a finance lease at the inception date?

  • The lessee can cancel the lease.
  • Gains/losses from fluctuations in the fair value of the residual accrue to the lessee.
  • The lessee has the ability to continue the lease for a secondary period at a rent substantially lower than market rent.
  • All of the above. (correct)

    • Which of the following is NOT an example of a situation that would normally lead to a lease being classified as a finance lease at the inception date?

  • The lease term is for a major part of the economic life of the asset, even if title is not transferred.
  • The lessee has the option to purchase the leased asset, and it is reasonably certain that the option will be exercised.
  • The present value of lease payments to be received by the lessor is equal to the fair value of the leased asset. (correct)
  • The lease transfers ownership to the lessee by the end of the lease term.

    • Which of the following indicators could NOT lead to a lease being classified as a finance lease at the inception date?

    <p>The lessee can cancel the lease.</p> Signup and view all the answers

    Which of the following is an example of a situation that could lead to a lease being classified as a finance lease at the inception date?

    <p>The lessee has the option to purchase the leased asset, and it is reasonably certain that the option will be exercised.</p> Signup and view all the answers

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