CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

A lease should be classified as a capital lease if the lease term is substantially equal to the life of the leased property. For the lease term, "substantial" is defined as ______.
A. 90% or more of the leased property's estimated economic life
B. 75% or more of the leased property's estimated economic life
C. 70% or more of the leased property's estimated economic life
Explanation: "Substantial" is defined by FASB as 75% or more of the leased property's estimated economic life.

User Contributed Comments 4

User Comment
andy4cfa Do not mess up the "90%" criteria which is called: the PV of the lease payment is equal to or greater than 90% of the fair value of the leased asset.
z2274743 - Lease term > 75% of useful economic life
- PV of lease payments > 90% of fair value
- Bargain purchase option
- taking ownership at end of lease
achu Good summary, z2274743
nmech1984 you rock it z2274743!
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