What is a characteristic of a lease intended as security?

• A. It grants the lessee all ownership rights and obligations in the asset.
• B. It transfers all benefits and burdens of ownership to the lessee.
• C. It is typically a short-term operating arrangement with no transfer of ownership.
• D. It involves the lessor maintaining ownership and control of the asset.

Answer: (B)

A lease intended as security is a financing arrangement where the economics resemble ownership. The lessee assumes the benefits and burdens of owning the asset—using it to generate value while also bearing the costs and risks that come with ownership, such as maintenance, taxes, insurance, obsolescence risk, and depreciation. This structure allows the asset to serve as collateral for the financing, even if legal title may stay with the lessor. Because the lessee effectively holds the ownership-like responsibilities and benefits, transferring all such aspects to the lessee is the defining characteristic. The other descriptions describe scenarios where ownership or control remains with the lessor or where there is no transfer of ownership, which do not fit a lease that is intended as security.