Which lease type triggers FASB 13 accounting requirements?

Which lease type triggers FASB 13 accounting requirements?

• A. Capital Lease
• B. Operating Lease
• C. Net Lease
• D. Full Payout Lease

Answer: (A)

Leases that effectively transfer ownership or substantially transfer the risks and rewards of use are accounted for on the balance sheet. Under FASB 13, a capital lease requires recording a leased asset and a corresponding lease liability, with depreciation (amortization) and interest expense reflecting financing rather than operating costs. This capitalization is what distinguishes a capital (finance) lease from an operating lease, which historically did not appear on the balance sheet. Because of that treatment, the type described here triggers FASB 13 accounting requirements.

Leases that effectively transfer ownership or substantially transfer the risks and rewards of use are accounted for on the balance sheet. Under FASB 13, a capital lease requires recording a leased asset and a corresponding lease liability, with depreciation (amortization) and interest expense reflecting financing rather than operating costs. This capitalization is what distinguishes a capital (finance) lease from an operating lease, which historically did not appear on the balance sheet. Because of that treatment, the type described here triggers FASB 13 accounting requirements.