FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Concept explainers

Leasing
Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.
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A lessee should classify a lease transaction as a finance lease if it is noncancelable and one or more of the five classification criteria are met. Otherwise, it is an operating lease. What are these criteria? Provide 2-3 reasons why a company would choose to lease an asset versus purchasing?

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