In Note 4, “Summary of accounting policies,” part 4.14, “Leases,” AF states that“leases are classified as finance leases when the lease arrangement transferssubstantially all the risks and rewards of ownership to the lessee.” Is this the policycompanies using U.S. GAAP follow?

In Note 4, “Summary of accounting policies,” part 4.14, “Leases,” AF states that“leases are classified as finance leases when the lease arrangement transferssubstantially all the risks and rewards of ownership to the lessee.” Is this the policycompanies using U.S. GAAP follow?

Financial Accounting Intro Concepts Meth/Uses

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ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter11: Notes, Bonds, And Leases

Section: Chapter Questions

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Question

In Note 4, “Summary of accounting policies,” part 4.14, “Leases,” AF states that
“leases are classified as finance leases when the lease arrangement transfers
substantially all the risks and rewards of ownership to the lessee.” Is this the policy
companies using U.S. GAAP follow?

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For companies that prepare their financial statements in accordance with both U.S. GAAP and IFRS, a lease is deemed to be a capital lease (usually called a finance lease under IFRS) if substantially all risks and rewards of ownership are transferred. In making this distinction, less judgment, more specificity is applied using a. IFRS. b. U.S. GAAP. c. Either U.S. GAAP or IFRS. d. Neither U.S. GAAP nor IFRS.
Describe the primary differences between IFRS and U.S. GAAP in the way leases are classified as either operating or finance (capital) leases.
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Is it possible that a finance lease under IFRS be classified as an operating lease under U.S. GAAP? Explain.
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