Based upon the standards issued by CICA, a ﬁnancial lease must be capitalized if the lessee
receives title to the asset by the end of the lease term.

Question

Quizplus · Accepted Answer

According to the standards issued by CICA (now replaced by CPA), a financial lease must be capitalized if it meets any one of the following conditions: (1) the lease transfers ownership of the asset to the lessee by the end of the lease term, (2) the lease contains a bargain purchase option (BPO) wherein the lessee can purchase the asset at a price lower than its fair value, (3) the lease term is for a major part of the economic life of the asset, or (4) the present value of the minimum lease payments equals or exceeds substantially all of the fair value of the asset. Therefore, if the lessee receives title to the asset by the end of the lease term, it must be capitalized.

Based Upon the Standards Issued by CICA, a ﬁNancial Lease