- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 8. Topics in Long-Term Liabilities and Equity
- Subject 3. Accounting and Reporting by the Lessee
CFA Practice Question
Which of the following best describes the lessee's incremental borrowing rate?
B. The rate the lessee would likely have paid if it had purchased the asset with external financing
C. The average rate on ten-year AA-rated bonds
A. The lessor's rate of return implicit in the lease payments
B. The rate the lessee would likely have paid if it had purchased the asset with external financing
C. The average rate on ten-year AA-rated bonds
Correct Answer: B
SFAS No. 13 defines the lessee's incremental borrowing rate as "that which the lessee would have incurred to borrow the funds necessary to buy the asset on a secured loan basis."
User Contributed Comments 2
| User | Comment |
|---|---|
| kalps | Lessess' incremental bowworing rate = the rate at which lessee would likely pay if it had purchased the asset with external borrowing |
| Freddie33 | Thanks for the simplification, Kalps |