From the lessee's point of view, a lease qualifies as a finance lease if it contains which one of the following?
A)The lease term is for a major part of the asset's economic life.
B)Title to the lease remains with the lessor
C)The lease does not contain a bargain purchase option
D)The present value of the minimum lease payments is at least 60% of the asset's fair market value

Question

Quizplus · Accepted Answer

According to accounting standards, a lease qualifies as a finance lease if it transfers the risks and rewards of ownership to the lessee. One of the indicators of this transfer is if the lease term is for a major part of the asset's economic life. Therefore, choice A is the correct answer. Choices B and C are not indicators of a finance lease, and while choice D is a factor, it is not the primary one.

From the Lessee's Point of View, a Lease Qualifies as a Finance