In the earlier years of a lease, from the lessee's perspective, accounting for a leased asset as

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Accounting for a leased asset as a capital lease will increase debt in the earlier years, as the cost of the asset is recorded as a liability. Accounting for it as an operating lease, on the other hand, does not result in the same level of liability on the balance sheet, thus causing less of an impact on debt. Option A and Option C are incorrect as capital leases are classified as finance leases under IFRS, and are not associated with higher income or lower income. Option D is incorrect as an operating lease does not cause an increase in debt compared to a finance lease, but instead has a different accounting treatment.

In the Earlier Years of a Lease, from the Lessee's