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Social ScienceExplain the accounting for finance leases.
Explain the accounting for finance leases.
Expert Answer
A lessee should categorize a lease as a finance lease when any of the following criteria are met:
- Ownership of the underlying asset is shifted to the lessee by the end of the lease term.
- The lessee has a purchase option to buy the leased asset, and is reasonably certain to use it.
- The lease term covers the major part of the underlying asset’s remaining economic life. This i...
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