Under the pre-2019 accounting standards, which of the following is not a conditi

Question

Under the pre-2019 accounting standards, which of the following is not a condition requiring the use of the capital lease reporting method?

Select one:

A. The lease, by its terms, automatically transfers ownership of the leased asset from the lessor to the lessee at the termination of the lease.

B. The lease term is at least 75% of the economic useful life of the leased asset

C. The lease, by its terms, does not automatically transfer ownership of the leased asset from the lessor to the lessee at the termination of the lease.

D. The lease provides that the lessee can purchase the leased asset for a nominal amount (bargain purchase price) at the termination of the lease.

E. None of the above

Explanation / Answer

Answer is .C. The lease, by its terms, does not automatically transfer ownership of the leased asset from the lessor to the lessee at the termination of the lease.

Capital lease accounting method requires a condition that as per lease agreement transfers ownership of the leased asset to the lessee.

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