A finance lease allows a firm to report more expenses over the life of a lease than an operating lease.

Question

Quizplus · Accepted Answer

In a finance lease, the lessee capitalizes the leased asset and recognizes depreciation and interest expenses over the lease term, which typically results in lower expenses in the early years compared to an operating lease, where the lease payments are expensed on a straight-line basis over the lease term.

A Finance Lease Allows a Firm to Report More Expenses