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Basic Question 2 of 4
Management's intentional structuring of a lease transaction as an off-balance sheet item (operating lease) illustrates how GAAP requirements may result in the quality of financial reporting being distorted. True or False?
User Contributed Comments 3
| User | Comment |
|---|---|
| kalps | FALSE, as GAAP requires disclosure of commitments under CL for the future five years |
| db28luke | GAAP does require disclosure, but it is usually buried near the end of the footnotes. Most people don't get that far. |
| poomie83 | Umm the question is refering to op lease - therefore true |
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Learning Outcome Statements
identify financial reporting choices and biases that affect the quality and comparability of companies' financial statements and explain how such biases may affect financial decisions;
evaluate the quality of a company's financial data and recommend appropriate adjustments to improve quality and comparability with similar companies, including adjustments for differences in accounting standards, methods, and assumptions;
evaluate how a given change in accounting standards, methods, or assumptions affects financial statements and ratios;
analyze and interpret how balance sheet modifications, earnings normalization, and cash flow statement related modifications affect a company's financial statements, financial ratios, and overall financial condition.
CFA® 2025 Level II Curriculum, Volume 2, Module 15.