In addition to the four criteria that a lessee must assess in deciding whether to classify a lease transaction as a capital lease, a lessor must meet two additional criteria. These include (1) the collectibility of the payments required from the lessee is reasonably predictable, and (2)
A) the lease includes an element of manufacturer or dealer profit.
B) the lessee has the ability to meet the requirements of the guaranteed residual value.
C) executory costs are provided for in a manner which makes their ultimate payment virtually a certainty.
D) no important uncertainties surround the amount of unreimbursable costs yet to be incurred by the lessor under the lease.

Question

Quizplus · Accepted Answer

For a lessor to classify a lease as a capital lease, there must be no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor under the lease.

In Addition to the Four Criteria That a Lessee Must