Under U.S.GAAP, compared with a financial lease, an operating lease will be associated with:
A)higher earnings per share
B)lower earnings per share
C)no difference in earnings per share
D)impact on earnings per share cannot be determined as operating leases are off-balance sheet items

Question

Quizplus · Accepted Answer

Under U.S. GAAP, an operating lease typically results in higher earnings per share (EPS) in the early years of the lease compared to a finance lease. This is because, for an operating lease, the lease expense is generally straight-line, leading to lower total expenses early on compared to the front-loaded interest and depreciation expenses of a finance lease.

Under USGAAP, Compared with a Financial Lease, an Operating Lease Will