Asked by Lopez Anibal on May 01, 2024
Verified
As per FASB 13, which of the following is a rule for a lease to qualify as an operating lease?
A) There is a transfer of ownership at lease expiration.
B) There is a bargain purchase option.
C) The lease term is for over 75% of the asset's economic life.
D) The present value of lease payments is less than 90% of the fair market value at lease origination.
FASB 13
Accounting standard issued by the Financial Accounting Standards Board related to lease accounting.
Operating Lease
A lease in which the lessee does not effectively acquire ownership of the leased asset. Accounted for as a stream of expense payments on the income statement. No entry is made on the balance sheet to reflect the acquisition of the asset. The most common form of off balance sheet financing. Compare with Financing lease.
Economic Life
The expected period during which an asset remains useful to the average owner.
- Understand the principles of accounting for operating and financial leases according to FASB 13 standards.
Verified Answer
Learning Objectives
- Understand the principles of accounting for operating and financial leases according to FASB 13 standards.
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