Compared to classifying a lease as a financing lea
Compared to classifying a lease as a financing lease, if a lessee reports the lease as an operating lease it will most likely result in a:
A.lower return on assets.
B.higher debt-to-equity ratio.
C.lower cash from operations.
参考解答
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2024-11-06 12:57:22
Ans:C.
The cash from operations is lower if the lease is classified as an operating lease, because the full lease payment is shown as an operating cash outflow.If it were classified as a financing lease, only the portion of the lease payment relating to interest expense reduces the operating cash flow and the portion of the lease payment that reduces the lease liability is classified as a financing cash flow.Therefore, the lessee’s cash from operations tends to be lower under operating leases.
The following two figures summarize the difference between the effects of finance leases and operating leases on the financial statements and ratios of the lessee.
Figure 1: financial statement impact of lease accounting
Figure 2: ratio impact of lease accounting
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