The essence of the treatment of long-term, non-cancelable capital leases is the same as if the company had borrowed the money and bought the asset.

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Long-term, non-cancelable capital leases are treated as if the company had borrowed the money and purchased the asset. The company is required to make periodic lease payments, which are similar to debt repayments, and the leased asset is recorded on the balance sheet as if it was owned outright. Therefore, the essence of the treatment of long-term, non-cancelable capital leases is the same as if the company had borrowed the money and bought the asset.

The Essence of the Treatment of Long-Term, Non-Cancelable Capital Leases