How are finance leases reported in the lessee's financial statements?
I. As an asset that is depreciated, similar to the company's other assets
II. As a footnote disclosure
III. As either a short-term or long-term liability, depending on the length of the lease

Question

Quizplus · Accepted Answer

Finance leases are reported in the lessee's financial statements both as an asset that is depreciated over its useful life (similar to how the company's other assets are treated) and as a liability (classified as either short-term or long-term depending on the lease term). This reflects the lessee's obligation to make lease payments and their right to use the leased asset.

How Are Finance Leases Reported in the Lessee's Financial Statements