Distinguishing between operating and non-operating leases is due in large part to the accounting concept of:
A)Conservatism.
B)Materiality.
C)Substance over form.
D)Historical cost.

Question

Quizplus · Accepted Answer

The accounting concept of substance over form requires that the economic substance of a transaction be recognized over its legal form. In the case of leases, this means that the essence of the agreement must be evaluated to determine whether it is more akin to a purchase or a rental. If the lease transfers substantially all of the benefits and risks of ownership to the lessee, it is classified as an operating lease; if not, it is classified as a capital or finance lease. This determination is not based on legal form alone, but rather on the underlying substance of the transaction.

Distinguishing Between Operating and Non-Operating Leases Is Due in Large