All of the following are true of constructive capitalization except
A)It's a method for making balance sheet data historically correct.
B)It treats all leases as if they were capital leases.
C)The liability is the discounted present value of the stream of minimum operating lease payments.
D)The method makes use of a discount rate that is the weighted average rate implicit in all leases,or the weighted average rate on interest-bearing long-term debt.

Question

Quizplus · Accepted Answer

Constructive capitalization is not primarily about making balance sheet data historically correct; rather, it's a method used to adjust the balance sheet for the effects of operating leases by treating them as if they were capital leases, thereby providing a more accurate picture of a company's financial leverage.

All of the Following Are True of Constructive Capitalization Except