Explore BrainMass
Share

Determining if a Lease is Treated as a Capital Lease or Operating Lease

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

1. Please explain in your own words the four criteria used for determining if a lease is to be treated as a capital lease, as opposed to as an operating lease.

2. Please discuss contingencies and how they are reported on financial statements. What conditions must be met before a contingency can be charged against income?

© BrainMass Inc. brainmass.com October 15, 2018, 11:43 am ad1c9bdddf - https://brainmass.com/business/leasing/determining-if-a-lease-is-treated-as-a-capital-lease-or-operating-lease-419333

Solution Preview

Please explain in your own words the four criteria used for determining if a lease is to be treated as a capital lease, as opposed to as an operating lease.

2. Please discuss contingencies and how they are reported on financial statements. What conditions must be met before a contingency can be charged against income?

A lease should be treated as a capital lease as long as it meets any of the following four established criteria. The life of the lease is greater than 75% of the life of the asset. However, as set forth by the FASB, if the start of the lease term falls within the last 25% of the total estimated economic life of the asset being leased, this criteria cannot be used as a determining factor for the type of lease. It ...

Solution Summary

Please explain in your own words the four criteria used for determining if a lease is to be treated as a capital lease, as opposed to as an operating lease.

2. Please discuss contingencies and how they are reported on financial statements. What conditions must be met before a contingency can be charged against income?

$2.19