Which accounts are typically affected when a lessee recognizes a capital lease under ASPE 3065?

Which accounts are typically affected when a lessee recognizes a capital lease under ASPE 3065?

• A. Leased asset and lease liability are recognized
• B. Lease payments are expensed
• C. Only the asset is recognized
• D. Only the lease liability is recognized

Answer: (B)

When a lease is classified as a capital (finance) lease under ASPE 3065, the lessee records both a leased asset and a lease obligation at the present value of minimum lease payments. This recognizes that the lessee effectively controls the asset and bears its risks and rewards. The asset is depreciated over the lease term (or the asset’s useful life if ownership transfers). The lease liability grows with interest and is reduced as lease payments are made, with each payment split into interest expense and a reduction of principal. In the income statement, you’ll see depreciation expense on the asset and interest expense on the lease liability, not the entire lease payment expensed upfront.

When a lease is classified as a capital (finance) lease under ASPE 3065, the lessee records both a leased asset and a lease obligation at the present value of minimum lease payments. This recognizes that the lessee effectively controls the asset and bears its risks and rewards. The asset is depreciated over the lease term (or the asset’s useful life if ownership transfers). The lease liability grows with interest and is reduced as lease payments are made, with each payment split into interest expense and a reduction of principal. In the income statement, you’ll see depreciation expense on the asset and interest expense on the lease liability, not the entire lease payment expensed upfront.