For a dealer or manufacturer lessor, the use of a nonoperating lease is preferred because it recognizes financing income and also accelerates revenue recognition in the form of the gross profit on the sale in the year of commencement. Under an operating lease treatment, the lessor only records rental income each year, spreading the revenue flow over the lease term.

Question

Quizplus · Accepted Answer

Under a nonoperating lease, the lessor recognizes the entire sales price of the leased asset as revenue in the year of commencement, resulting in accelerated revenue recognition.

For a Dealer or Manufacturer Lessor, the Use of a Nonoperating