Which of the following statements regarding finance leases is true?

Question

Quizplus · Accepted Answer

A finance lease is a long-term lease agreement that transfers substantially all of the risks and rewards of ownership to the lessee. As per IFRS 16, a finance lease is one that transfers substantially all the risks and rewards incidental to ownership of an asset. This means that the lease term is for the majority of the useful life of the asset. The lease is non-cancellable as it is legally binding, and the lessee is required to make fixed payments over the lease term. Interest and depreciation are expenses of the lessee, not the lessor, and the lease payments are not treated as ownership costs.

Which of the Following Statements Regarding Finance Leases Is True