The lease is treated as a capital lease (financial lease) for the lessee and must be listed on the firm's balance sheet if it satisfies any of the following conditions EXCEPT:

Question

Quizplus · Accepted Answer

Option A is incorrect because a lease that contains an option to purchase the asset at its fair market value does not automatically qualify it as a capital (finance) lease. The criteria for a lease to be considered a capital lease typically include a bargain purchase option, lease term for a major part of the asset's economic life, ownership transfer at the end of the lease term, or if the present value of lease payments equals or exceeds substantially all of the fair market value of the leased asset. An option to purchase at fair market value does not provide a financial incentive that would typically lead to capital lease classification.

The Lease Is Treated as a Capital Lease (Financial Lease)