Section 3: 25–35%3F
Lessee Accounting
Exam insight
Classifying a lease - finance vs. operating - is your first decision, and the AICPA loves to test it with tricky cases. The trap: a lease is a finance lease if it meets ANY one of the five criteria. Candidates who only remember the 'major part of the economic life' test miss the other four. For the math, the lease liability is always the present value of future payments - just be sure you grab the right PV factor (ordinary annuity vs. annuity due).
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What AICPA wants you to know
- 1Classify a lease as finance or operating using ASC 842 criteria
- 2Calculate the right-of-use (ROU) asset and lease liability at commencement
- 3Record lease journal entries for both finance and operating leases
- 4Calculate interest and amortization for a finance lease
- 5Understand the income statement presentation difference between lease types