CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Which of the following conditions is not a criterion for classifying a lease as a capital lease?
A. The present value of the minimum lease payments is at least 75% of the fair value of the leased asset.
B. The lessee has the option of acquiring the asset at the end of the lease term at a bargain price.
C. The lease term is greater than three-quarters of the economic life of the asset.
Explanation: The criterion is that the present value of the minimum net lease payments is at least 90% of the fair market value of the asset at the inception of the lease. Another criterion is "the lease transfers ownership in the leased asset to the lessee at the end of the lease term."

User Contributed Comments 1

User Comment
Mikehuynh Classifying a lease as capital lease:
(1)lease term is 75% or more estimated economic life
(2) present value of lease pmt is 90% or more fair market value
(3) transfer ownership at the end of the lease
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