Which of the following is NOT a lease classification for a lessor under ASC 842?

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Multiple Choice

Which of the following is NOT a lease classification for a lessor under ASC 842?

Explanation:
Under ASC 842, a lessor classifies leases as either operating or finance. Within the finance category, the two recognized subtypes are sales-type leases and direct financing leases, which differ mainly in whether the lessor recognizes selling profit at lease inception. A leveraged lease is not listed as its own classification under ASC 842. If a lease uses third-party debt or other leverage, it would still be accounted for as a finance lease (and could be a sales-type or direct financing lease depending on the profitability at inception), but the standard doesn’t treat “leveraged lease” as a separate category.

Under ASC 842, a lessor classifies leases as either operating or finance. Within the finance category, the two recognized subtypes are sales-type leases and direct financing leases, which differ mainly in whether the lessor recognizes selling profit at lease inception. A leveraged lease is not listed as its own classification under ASC 842. If a lease uses third-party debt or other leverage, it would still be accounted for as a finance lease (and could be a sales-type or direct financing lease depending on the profitability at inception), but the standard doesn’t treat “leveraged lease” as a separate category.

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