When distinguishing between finance and operational leases, which aspect is more important? Question 5Answer a. The content of the deal b. The type of asset leased c. The duration of the lease d. The form of the lease
When distinguishing between finance and operational leases, the most important aspect is:
a. The content of the deal
The content of the deal refers to the terms and conditions of the lease agreement, which determine whether the lease is classified as a finance lease or an operational lease. This includes factors such as the transfer of ownership, the lease term relative to the asset's useful life, and the present value of lease payments compared to the asset's fair value. These elements are critical in determining the classification under accounting standards.