- 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
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?
Correct Answer: True
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. |