A noncancelable arrangement that requires the lessee to make payments for the use of an asset over a relatively long period of time is called a(n)
A) operating lease.
B) financial lease.
C) sale-leaseback arrangement.
D) direct lease.

Question

Quizplus · Accepted Answer

A financial lease is a long-term lease agreement where the lessee is obligated to make payments for the use of the asset over the entire lease term, and typically comes with a noncancelable arrangement. Operating leases, on the other hand, are typically short-term and cancellable. A sale-leaseback arrangement refers to the situation where the owner of an asset sells it to a lessee and then immediately leases it back. A direct lease is not a commonly used term in accounting and finance.

A Noncancelable Arrangement That Requires the Lessee to Make Payments