Page 46 - FINAL CFA I SLIDES JUNE 2019 DAY 8

Session Unit 8:

29. Long-lived Assets

LOS 29.o: Explain and evaluate how leasing rather than purchasing assets affects financial statements and ratios.
LOS 29.p: Explain and evaluate how finance leases and operating leases affect financial statements and ratios from
the perspective of both the lessor and the lessee. p.232

Finance -or capital
lease, as called in
US, reflects the
purchase of an asset
with debt, for which
over the lease term,
depreciation tanties
expense and interest
expense on the debt

is recognised in the
income statement.
An operating lease,
on the other hand, is
a rental agreement -
no asset or liability is
reported by the
lessee and periodic
payments are
recognised as
expense in the

income statement.