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What is the determining factor in classifying a lease as either an operating lease or a finance lease?
What is the determining factor in classifying a lease as either an operating lease or a finance lease?
- The length of the lease
- The form of the contract
- The location of the underlying asset
- The substance of the transaction (correct)
When is lease classification made?
When is lease classification made?
- At the end of the lease term
- At the midpoint of the lease term
- At the beginning of the lease term (correct)
- At the discretion of the lessor
How is a lease classified as a finance lease?
How is a lease classified as a finance lease?
- If it transfers some of the risks and rewards incidental to ownership of an underlying asset
- If it transfers substantially all the risks and rewards incidental to ownership of an underlying asset (correct)
- If it transfers none of the risks and rewards incidental to ownership of an underlying asset
- If it transfers all the risks and rewards incidental to ownership of an underlying asset
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