GAAP establishes specific criteria for the treatment of leases.Which of the following does not accurately describe the criteria applicable to a lessee?
A)The lease agreement contains a bargain purchase option.
B)The lease term is equal to or exceeds 75% of the leased asset's useful life.
C)The lease agreement transfers title of the leased asset to the lessee at the end of the lease term.
D)The present value of the minimum lease payments is equal to or greater than 75% of the leased asset's fair value.

Question

Quizplus · Accepted Answer

The correct threshold for the present value of the minimum lease payments is 90% of the leased asset's fair value, not 75%.

GAAP Establishes Specific Criteria for the Treatment of Leases