- CFA Exams
- CFA Level I Exam
- Study Session 8. Financial Reporting and Analysis (3)
- Reading 28. Non-current (Long-term) Liabilities
- Subject 8. Accounting and Reporting by the Lessee
CFA Practice Question
Under U.S. GAAP, which financial statement does a capital lease affect?
B. Balance sheet only
C. Income statement and balance sheet
A. Income statement only
B. Balance sheet only
C. Income statement and balance sheet
Correct Answer: C
A capital lease affects the income statement because a part of each lease payment is interest expense. The leased asset is amortized, resulting in amortization expense on the income statement. A capital lease also affects the balance sheet. At the inception of the lease, the lessee recognizes an asset and a liability equal to the present value of the lease payments to be made under the terms of the lease.
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