If the Present Value of Future Lease Payments Equals or Exceeds

question 22

Multiple Choice

If the present value of future lease payments equals or exceeds 90% of the fair value of the leased property, the

• A) conditions are met for the lease to be considered a finance lease.
• B) lease is uneconomical and should not be entered into.
• C) lease may be classified as an operating lease.
• D) recording of a lease liability is optional-that is, the off-balance sheet approach can be elected.

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Definitions:

England

A country that is part of the United Kingdom, known for its rich history, cultural contributions, and legal system.

Novation

The act of replacing one party in a contract with a new party, or replacing an old contract with a new contract, with the agreement of all parties involved.

Substituted Contract

An agreement made to replace an existing contract, involving the mutual consent of all parties to change the terms or parties involved.

Incidental Damages

Expenses or costs that arise directly from a breach of contract, beyond the direct damages or losses incurred.