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Basic Question 13 of 15
A sales-type lease occurs when the lessor sells the product and finances the sale through a capital lease. The lessor makes a profit or loss from the sale and financing income is recognized over the lease term. True or False?
User Contributed Comments 6
| User | Comment |
|---|---|
| kalps | Both sales type and direct finance leases are forms of capital leases |
| danlan | Sales type recognizes gain/loss at inception and over the lease term; direct finance recognizes gain/loss over the lease term. |
| thekid | I'M CONFUSED!!! I thought it would only be considered a 'Sales-type lease' if there was a GAIN at inception.... Look at the glossary of the textbook and it says: "...PV of the lease pmts. EXCEEDS the carrying value of the leased asset..." |
| bigmac | It would be a negative gain. |
| johntan1979 | danlan's statement is incorrect. Direct financing recognizes no gain or loss. It recognizes financing income or interest income over the life of the lease. |
| quanttrader | in a sales type lease, the manufacturer leases to lessee and collects interest over the term of the loan. Both a manufacturer's profit and financing profit are booked. |
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Learning Outcome Statements
explain the financial reporting of leases from the perspectives of lessors and lessees
CFA® 2025 Level I Curriculum, Volume 2, Module 8.