For companies engaged in direct financing leases (ASPE) or finance leases (IFRS),
A) they are generally manufacturers or retail stores.
B) their profits are derived from leasing their inventory at a profit.
C) their objective is to earn interest income on the financing arrangement with the lessee.
D) such leases are frequently operating leases.

Question

Quizplus · Accepted Answer

The objective of companies engaged in direct financing leases (ASPE) or finance leases (IFRS) is to earn interest income on the financing arrangement with the lessee. These leases are not typically operating leases as the lessor is essentially acting as a creditor and typically retains ownership of the leased asset. Manufacturers or retail stores may engage in direct financing leases, but they are not exclusive to those types of companies. Profits may be derived from leasing inventory, but that is not the main objective of direct financing leases.

For Companies Engaged in Direct Financing Leases (ASPE) or Finance