Synthetic leases may achieve all of the following benefits to the borrower except:
A)window-dress the balance sheet.
B)increase cash flow.
C)reduce tax expense on the income statement.
D)increase net income.

Question

Quizplus · Accepted Answer

Synthetic leases are structured to be treated as operating leases for accounting purposes, allowing assets to be kept off the balance sheet, which can make the company's financial position appear stronger (window-dressing the balance sheet) and potentially improve cash flow reporting. However, they do not directly reduce tax expense on the income statement because, for tax purposes, the assets and liabilities associated with synthetic leases are typically recognized, negating the tax reduction benefit.

Synthetic Leases May Achieve All of the Following Benefits to the Borrower