An Operating Lease Need Not Be Capitalized, but Its Basic

question 33

True/False

An operating lease need not be capitalized, but its basic features must be disclosed in a footnote to the financial statements.

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Definitions:

Direct Lease

A leasing agreement where the lessor buys the asset chosen by the lessee and then leases it back to them.

Lessor

The party that leases or rents out a property or asset to another party, known as the lessee.

Present Value

The present value of a future amount of money or series of cash inflows, discounted by a particular return rate.

Fair Market Value

The price at which an asset would trade in a competitive auction setting, reflecting the value agreed upon by a willing buyer and seller.