CFA Practice Question

CFA Practice Question

A lessee accounts for a lease as a capital lease if the lease matches one of the following criteria. Which one is not one of the criteria?
A. The lease term is equal to 90% or more of the estimated economic life of the property.
B. The present value of the rentals and other minimum lease payments at the beginning of the lease term equals at least 90% of the of the fair value of the leased property less any related investment tax credits retained by the lessor.
C. The lease contains an option to purchase the property at a bargain price.
Explanation: The lease term is equal to 75% or more of the estimated economic life of the property.

One more criteria is "The lease transfers ownership of the property to the lessee by the end of the lease term."

User Contributed Comments 3

User Comment
danlan Is B "less any related investment tax credits ..." correct?
takor The selected answer option says 90%, while the explanation says 75%?
takor ohhhh, i see the point now
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