A lessee will record a leased asset at the lower of the present value of the minimum lease payments or the leased asset's fair value when the lease is a capital lease.

Question

Quizplus · Accepted Answer

This is a correct statement in relation to the accounting treatment of capital leases. According to accounting standards, lessees are required to record a leased asset at the lower of the present value of minimum lease payments or the fair value of the leased asset when the lease meets certain criteria, such as being non-cancelable and transferring ownership of the asset to the lessee at the end of the lease term. This is because the lessee is effectively purchasing the asset through the lease agreement, and thus the value of the asset is reflected on the lessee's balance sheet.

A Lessee Will Record a Leased Asset at the Lower