CA Inter P6 · Chapter 2 · Question 3 of 7
Which of the following is a feature of a financial lease rather than an operating lease?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) The lease is non-cancellable and the lessee bears the risks and rewards of ownership, including maintenance, over most of the asset's economic life
Explanation
A financial lease is a long-term, non-cancellable arrangement under which the lessee effectively gets the risks and rewards of ownership and usually bears maintenance and insurance. The lease term covers most of the asset's life, so the lessor recovers its investment plus a return. The other options describe an operating lease.
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