Lessees prefer to account for their leases as short-term leases because:
A) This decreases the amount of liability reported
B) This increases their debt to total equity ratio
C) This decreases the income tax expense.
D) This increases the amount of total assets.

Question

Quizplus · Accepted Answer

Lessees may prefer to account for their leases as short-term leases because it decreases the amount of liability reported on their financial statements. This can improve their financial ratios and reduce perceived risk to investors. However, it may also result in higher lease payments over time.

Lessees Prefer to Account for Their Leases as Short-Term Leases