The requirements of SFAS No. 13 represent conservatism because a higher interest rate will cause a higher present value and could therefore result in lease capitalization.

Question

Quizplus · Accepted Answer

SFAS No. 13 requires the use of the incremental borrowing rate or the implicit rate in the lease to calculate the present value of minimum lease payments. A higher interest rate actually results in a lower present value, making it less likely for a lease to meet capitalization criteria.

The Requirements of SFAS No