The five criteria provided in GAAP for distinguishing a finance lease from an operating lease do not include:
A) The agreement specifies that ownership transfers at the end of the lease term.
B) The collectibility of the lease payments must be reasonably predictable.
C) The agreement grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise.
D) The noncancelable lease term is for the major part of the remaining economic life of the leased asset.

Question

Quizplus · Accepted Answer

The collectibility of the lease payments being reasonably predictable is not a criterion for distinguishing a finance lease from an operating lease under GAAP. The criteria focus on the terms of the lease that relate to the transfer of ownership, purchase options, lease term, and the value of the leased asset, not on the collectibility of lease payments.

The Five Criteria Provided in GAAP for Distinguishing a Finance