Which of the following correctly describes the accounting for leases?
A)There are eight criteria used to establish whether the lessor maintains effective control of the leased asset.
B)A lease asset and a lease liability are initially recognized for both a capital lease and an operating lease.
C)If none of the criteria used to establish whether the lessor maintains effective control of the leased asset are met,then the lease is classified as a capital lease.
D)The amount recorded as a lease asset and a lease liability is the sum of the required future lease payments.

Question

Quizplus · Accepted Answer

Accounting for leases requires the recognition of both a lease asset and a lease liability for both capital leases and operating leases. This change was implemented by the Financial Accounting Standards Board's ASU 2016-02, which became effective for public companies for fiscal years beginning after December 15, 2018. Option A is incorrect because there are only two criteria used to determine whether a lease is classified as a capital lease. Option C is incorrect because if none of the criteria for a capital lease are met, the lease is classified as an operating lease. Option D is incorrect because the amount recorded as a lease asset and lease liability is the present value of future lease payments, not the sum of required future lease payments.

Which of the Following Correctly Describes the Accounting for Leases