Of the five criteria for a finance lease, which one is not applied if the lease begins "at or near the end" of the economic life of the underlying asset?
A) A purchase option is reasonably certain to be exercised.
B) The economic life test.
C) The present value of lease payments greater or equal to substantially all of fair value test.
D) The passage of title criteria.

Question

Quizplus · Accepted Answer

The economic life test is not applied if the lease begins "at or near the end" of the economic life of the underlying asset. The other four criteria (purchase option, present value of lease payments, passage of title, and fair value test) must still be met for the lease to be considered a finance lease.

Of the Five Criteria for a Finance Lease, Which One