What does lease term mean on the CPA exam?
Lease term. The non-cancellable period, plus any option period the lessee is reasonably certain to take, plus any period controlled by the lessor.
Defined against ASC 842-10-30-1.
Which CPA exam sections use lease term?
Lease term appears in the FAR section of the CPA exam.
Other terms defined against ASC 842-10
- direct financing lease: A lessor lease where control transfers only because a third-party guarantee makes collection probable.
- finance lease: A lessee lease that meets one of five transfer-of-control tests.
- sales-type lease: A lessor lease that transfers control of the asset, so the lessor derecognizes it and records selling profit at commencement.
Related terms
- right-of-use asset: The lessee's asset representing its right to use the leased item for the lease term.
- related person: A person close enough to the taxpayer that the Code distrusts the transaction: family, controlled entities, and certain fiduciaries.
- loss contingency: An existing condition involving uncertainty that may produce a loss, resolved by a future event.
- lease liability: The lessee's obligation to make the remaining lease payments, measured at their present value.
- operating lease: A lease that does not transfer control.