- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 8. Topics in Long-Term Liabilities and Equity
- Subject 4. Accounting and Reporting by the Lessor
CFA Practice Question
Which of the following statements with regard to recording depreciation expense in an operating lease arrangement is true?
B. The lessor records depreciation expense using the lease term in the calculation.
C. The lessor records depreciation expense using the estimated useful life of the asset in the calculation.
A. The lessee records depreciation expense over the estimated useful life of the asset.
B. The lessor records depreciation expense using the lease term in the calculation.
C. The lessor records depreciation expense using the estimated useful life of the asset in the calculation.
Correct Answer: C
In an operating lease the lessor owns the asset legally and accounts for it as such. Since the asset is returned to the lessor in an operating lease, depreciation is calculated based on the estimated useful life of the asset.
User Contributed Comments 4
| User | Comment |
|---|---|
| thud | Difference between A and C? |
| nike | lessee versus lessor. |
| mordja | If the question involved a capital lease B would be correct. |
| Shaan23 | Mordja --- NO. With a capital lease the asset is derognized for the LESSOR. Removed from his BS. |