Theoretical justification for the treatment


GAAP requires that some lease agreements be accounted for as purchases. The theoretical justification for this treatment is that a lease of this type:

a. Complies with the concept of form over substance.

b. Reflects the relationship of cause and effect.

c. Satisfies the concept of historical cost.

d. Conveys most of the risks and benefits of property ownership.

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Accounting Basics: Theoretical justification for the treatment
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