Distinguishing between operating and capital leases is due in large part to the accounting concept of:
A)Conservatism.
B)Materiality.
C)Substance over form.
D)Historical cost.

Question

Quizplus · Accepted Answer

The accounting concept of substance over form requires that the economic substance of a transaction be considered, rather than simply relying on its legal form. This is particularly relevant in distinguishing between operating and capital leases, as a lease may be structured to appear as one type of lease (in form) while having economic attributes of the other type (in substance). Therefore, substance over form is the key concept in determining whether a lease should be classified as an operating or capital lease.

Distinguishing Between Operating and Capital Leases Is Due in Large