[Anonymous]

If it isnt a capital lease why depreciate it? I thought non capital leases werent capitalized on the lessee’s financial statements?

[FIFOisbetterthanLIFO]

The lessee treats a lease as a capital if it meets one of the four criteria (title transfer, bargain purchase option, 75% of asset life, 90% of PV value of asset). It doesn't matter how the lessor handles the transaction. All capital leases are depreciated.

FAR - Passed (82)
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AUD - Passed (89)
REG - Passed! (81)
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[Spartans92]

As gearty mentioned if you pay so dang much for so dang long. Treat like it's yours and capitalize it.:)

BEC- PASS

[leglock]

wouldn't you know those rules already changed. after you pass the test, look up the new rules bc they are quite different now for lessee.

[SGShiver]

Your title post/question is kind of confusing. A lessee only recognizes two types of leases Operating and Capital leases. The lessor recognizes a lease as operating or non-operating. Non-operating is then split into two categories: Sales Type and Direct Financing depending on if it has a dealer's profit or loss. The terminology differs depending on who is recording the transaction. Although you are correct in saying that the lessee only depreciates the capital lease, the terminology of direct financing and sales type is only used when recording the lessor transactions. By saying the lease is a direct financing or sales-type lease under the lessor books, you are recording it as a capital lease in a lessee book so it would not be a non-capital lease for the lessee.

FAR- 53, next time 5/5/16
B: 7/30/16
A:TBD
R:TBD

[Author]

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