💰 CPA Exam Prep

What is the difference between an operating lease and a finance lease?

A There is no difference
B A finance lease transfers substantially all risks and rewards of ownership; an operating lease does not
C Operating leases are longer
D Finance leases are cheaper

✓ Correct Answer: Option B

Finance leases transfer ownership risks/rewards and are recorded as assets/liabilities; operating leases are now also on-balance-sheet under ASC 842.

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