Lessee Accounting

Lease classification — finance vs. operating — is the first decision you make, and AICPA tests it with edge cases. The trap: a lease that meets ANY one of the five finance lease criteria must be classified as finance. Candidates who memorize 'most of the remaining economic life' forget the others. For the calculation itself, the lease liability is always the present value of future payments — make sure you use the right PV factor (ordinary annuity vs. annuity due).