Which of the following statements characterizes an operating lease?
A) The lessee reports cash outflows as financing activities.
B) The lessor records depreciation and lease revenue.
C) The lessor transfers title at the end of the lease term.
D) The lessee has an option to purchase the leased assets and is reasonably sure to exercise the option.

Question

Quizplus · Accepted Answer

An operating lease is a type of lease in which the lessor (owner of the asset) records depreciation and lease revenue, while the lessee (user of the asset) reports cash outflows as operating activities. The lessor retains ownership of the asset and transfers no title at the end of the lease term. Option to purchase the leased assets is generally not included in an operating lease.

Which of the Following Statements Characterizes an Operating Lease