Section 2: 35–45%B7

Leases: Lessor Accounting and Advanced Topics

Exam insight

ASC 842 put nearly all leases on the balance sheet, and BAR tests the harder side of the standard: lessor classification, right-of-use measurement, and the sale-leaseback transactions that FAR only introduces. Nailing the present-value mechanics and the five classification criteria matters because one misclassification reshapes the entire pattern of income and expense.

What AICPA wants you to know

1Apply the five lease classification criteria from the lessee perspective.
2Measure the initial lease liability as the present value of lease payments and build the right-of-use asset.
3Distinguish finance from operating leases and their expense patterns for a lessee.
4Classify lessor leases as sales-type, direct financing, or operating.
5Account for sale-leaseback transactions, including when a sale has occurred.
6Prepare the journal entries and amortization schedules for a typical lease.

Patterns in this topic

The exam re-skins the same archetypes. Recognize these here, then drill them in the Pattern Lab.

The Lease LedgerClassify with the five criteria, measure the liability as the present value of payments, then build the ROU asset and roll it forward.

Exam tip

Study smarter: before you expand each card, cover the screen and try to recall what the concept means from its title alone. Retrieving it from memory builds the recall the exam actually tests, and it beats re-reading.