Which statement defines a lease?

Which statement defines a lease?

• A. A transaction in which use and possession but not title to tangible property is transferred for consideration
• B. A transaction that transfers ownership at inception
• C. A service contract with no transfer of use rights
• D. A license to use property

Answer: (A)

A lease is a contract that gives the user the right to control the use of an identified asset for a period of time in exchange for payment, with ownership staying with the lessor. The statement that describes transfer of use and possession of a tangible property for consideration captures this exact idea: the user gains the right to use the asset for a period, pays for it, and does not receive title to the asset. The other scenarios describe arrangements that aren’t leases: transferring ownership at inception is a sale, not a lease; a service contract delivers services without yielding the right to use the asset; and a license to use property is permission to use rather than granting the right to control the asset for a period.

A lease is a contract that gives the user the right to control the use of an identified asset for a period of time in exchange for payment, with ownership staying with the lessor. The statement that describes transfer of use and possession of a tangible property for consideration captures this exact idea: the user gains the right to use the asset for a period, pays for it, and does not receive title to the asset.

The other scenarios describe arrangements that aren’t leases: transferring ownership at inception is a sale, not a lease; a service contract delivers services without yielding the right to use the asset; and a license to use property is permission to use rather than granting the right to control the asset for a period.