CLFP EXAM - Financial and Tax Accounting for
Leases (2026) comprehensive questions and
verified answers (detailed & elaborated) ACTUAL
EXAM
Save
Terms in this set (138)
What is a primary goal of the Consistent treatment of like transactions to allow
accounting profession? clarity in presentation and consistency in
interpretation of financial statements prepared by
various individuals or entities.
How did APB (Accounting Principals Created Opinion #5 (Reporting of Leases in
Board) fail? Financial Statements of Lessees) and Opinion #7
(Accounting for Leases in Financial Statements for
Lessors) that ha different opinions and left lessors &
lessees with conflicting rules.
What was FASB 13? Financial Accounting Standards Board issued
"Accounting for Leases" which was a
comprehensive set of standards to be followed by
lessors and lessees in accounting lease
transactions.
,What is Accounting Standards Approved by FASB in 7/2009, a single source of of
Codification? authoritative US accounting and reporting
standards
What now governs lease ASC 840
accounting?
What is a Bargain Renewal Option? a provision allowing lessee, at his option, to renew
the lease for a rental sufficiently lower than the
expected fair value of the property at the date the
option becomes excercisable. It is reasonably
assured the renewal option will be exercised.
What is a Bargain Purchase Option? a provision allowing lessee, at his option, to
purchase the property for a price sufficiently lower
than the expected fair market value of the property
at the date the option becomes excercisable. It is
reasonably assured the purchase option will be
exercised.
What are Contingent Rentals? Rentals that represent increases or decreases in the
lease payments made that result from changes in
the factors on which lease payments are based
occurring subsequent to the inception of the lease.
Increases may occur due to increased construction
cost or indexed interest rates.
What is Economical Useful Life of At the inception of the the lease, the estimated
Leased Property? remaining period during which the property is
expected to be economically usable for its
intended purpose by one or more users. This may
be impacted by usage, technology and
deterioration. Independent of lease term.
, What is Residual Value of Leased Estimated fair value of the lease property at the
Property? end of the lease.
What is Executory Costs? The costs such as insurance, maintenance and
taxes incurred for the leased property, whether
paid by lessor or lessee. Also include costs paid by
lessee as guarantor.
What is Value of Leased Property? The price at which the property could be sold at an
arm's length transaction by unrelated parties.
1.) normal selling price, net volume discounts, for a
lessor who manufacturer/dealer
2.) Cost, net volume discounts for a lessor that is
note a manufacturer or dealer.
What is Implicit Interest Rate? The discount rate that, when applied to the
minimum lease payments cause the aggregate
present value at the beginning of the lease term to
be equal to the fair value of the leased property to
the lessor at the inception of the lease.
What is Inception of the Lease? The date lease commitment.
What is Incremental Borrowing Rate? The rate, at the inception of the lease, the lessee
would have incurred to borrow, under like terms,
the funds necessary to purchase the lease asset.
What is Initial Direct Cost (IDC)? Costs incurred by lessor that are
1) to originate the lease in transactions with
independent third parties that are required and
would have occurred regardless of leasing
2.) certain cost incurred by the lessor
Leases (2026) comprehensive questions and
verified answers (detailed & elaborated) ACTUAL
EXAM
Save
Terms in this set (138)
What is a primary goal of the Consistent treatment of like transactions to allow
accounting profession? clarity in presentation and consistency in
interpretation of financial statements prepared by
various individuals or entities.
How did APB (Accounting Principals Created Opinion #5 (Reporting of Leases in
Board) fail? Financial Statements of Lessees) and Opinion #7
(Accounting for Leases in Financial Statements for
Lessors) that ha different opinions and left lessors &
lessees with conflicting rules.
What was FASB 13? Financial Accounting Standards Board issued
"Accounting for Leases" which was a
comprehensive set of standards to be followed by
lessors and lessees in accounting lease
transactions.
,What is Accounting Standards Approved by FASB in 7/2009, a single source of of
Codification? authoritative US accounting and reporting
standards
What now governs lease ASC 840
accounting?
What is a Bargain Renewal Option? a provision allowing lessee, at his option, to renew
the lease for a rental sufficiently lower than the
expected fair value of the property at the date the
option becomes excercisable. It is reasonably
assured the renewal option will be exercised.
What is a Bargain Purchase Option? a provision allowing lessee, at his option, to
purchase the property for a price sufficiently lower
than the expected fair market value of the property
at the date the option becomes excercisable. It is
reasonably assured the purchase option will be
exercised.
What are Contingent Rentals? Rentals that represent increases or decreases in the
lease payments made that result from changes in
the factors on which lease payments are based
occurring subsequent to the inception of the lease.
Increases may occur due to increased construction
cost or indexed interest rates.
What is Economical Useful Life of At the inception of the the lease, the estimated
Leased Property? remaining period during which the property is
expected to be economically usable for its
intended purpose by one or more users. This may
be impacted by usage, technology and
deterioration. Independent of lease term.
, What is Residual Value of Leased Estimated fair value of the lease property at the
Property? end of the lease.
What is Executory Costs? The costs such as insurance, maintenance and
taxes incurred for the leased property, whether
paid by lessor or lessee. Also include costs paid by
lessee as guarantor.
What is Value of Leased Property? The price at which the property could be sold at an
arm's length transaction by unrelated parties.
1.) normal selling price, net volume discounts, for a
lessor who manufacturer/dealer
2.) Cost, net volume discounts for a lessor that is
note a manufacturer or dealer.
What is Implicit Interest Rate? The discount rate that, when applied to the
minimum lease payments cause the aggregate
present value at the beginning of the lease term to
be equal to the fair value of the leased property to
the lessor at the inception of the lease.
What is Inception of the Lease? The date lease commitment.
What is Incremental Borrowing Rate? The rate, at the inception of the lease, the lessee
would have incurred to borrow, under like terms,
the funds necessary to purchase the lease asset.
What is Initial Direct Cost (IDC)? Costs incurred by lessor that are
1) to originate the lease in transactions with
independent third parties that are required and
would have occurred regardless of leasing
2.) certain cost incurred by the lessor
