Leasing equipment due to a desire to avoid capitalization of the asset is considered an example of leasing to reduce uncertainty.

Question

Quizplus · Accepted Answer

Leasing equipment to avoid capitalization is primarily a financial strategy to manage balance sheet appearances and capital expenditure, rather than a strategy to reduce uncertainty. Reducing uncertainty through leasing typically involves flexibility in upgrading technology or equipment without the risks of ownership.

Leasing Equipment Due to a Desire to Avoid Capitalization of the Asset