Distinguish between Finance lease and operating lease.

CPA-Financial-Management-Section-3 Revision kit

Finance lease                                                    Operating lease
– Long term (at least 90% of asset life).      – short-term
– Not cancelable                                                – revocable
– Operating, maintenance and insurance     – borne by the owner (lessor) of costs borne by lessee. asset.
– Option to buy asset at end of lease period.     – No option.

Leave a Reply

Your email address will not be published. Required fields are marked *