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

Question

Quizplus · Accepted Answer

Lessees prefer to account for their leases as operating leases because it decreases the amount of liability reported on their balance sheet. Operating leases are treated as off-balance sheet financing, meaning the lease obligations do not appear as liabilities, which can make the company's financial position appear stronger.

Lessees Prefer to Account for Their Leases as Operating Lease