CLFP - ACRONYMS EXAM QUESTIONS AND
COMPLETE SOLUTIONS GRADED A+
What is ASC 842? - ANSWERASC 842 is the Accounting Standards Codification
(ASC) topic issued by the Financial Accounting Standards Board (FASB) that
governs the accounting for leases.
What are the key changes brought by ASC 842? - ANSWERASC 842
significantly changed lease accounting by requiring lessees to recognize most
leases on their balance sheets as both a right-of-use asset and a lease liability.
What are the criteria for a lease to be classified as a finance lease under ASC
842? - ANSWERThe criteria include title transfer, bargain purchase option,
lease term equal to or greater than 75% of the economic life, present value of
payments equal to or greater than 90% of fair market value, and specialized
nature of the asset.
Double-Dip Lease - ANSWERBased on cross-border leases, but structured to
take advantage of tax benefits in both the lessee and lessor's country
Leveraged Lease - ANSWER· Unique mix of tax an accounting benefits.
· Up to 97% of recourse and nonrecourse debt is used to finance the assets.
· Created high returns on equity to the lessor which allowed the lessor to
offer lower rates.
, Synthetic Lease - ANSWERDesigned to be a loan for tax purposes, but an
operating lease for accounting purposes.
Equipment Lease Definition - ANSWERA transaction in which use and
possession, but not title to tangible property, is transferred for consideration.
Micro-Ticket - ANSWER· Less than $25,000
· Examples: credit card, machines, laptops, computers, etc.
Small-Ticket - ANSWER· Less than $250,000
· Examples: trucks, trailers, medical equipment, etc.
Mid-Ticket - ANSWER· Less than $5,000,000
· Examples: fleet vehicles, CNC machine tools, agricultural equipment, etc.
Large Ticket - ANSWER· Larger than $5,000,000
· Examples: Rail cars, aircraft, marine, etc.
Industry Participants - ANSWER· Equipment End-Users - Borrower/Lessee
· Third Party Originators - Brokers, Alternative Lenders, etc.
· Lessors & Lenders - Suppliers of the finance produce
· Investors - Capital market buyers and sellers
· Regulators - IRS, CFPB, etc.
· Trade Associations - AACFB, CLFP, ELFA, NEFA, etc.
COMPLETE SOLUTIONS GRADED A+
What is ASC 842? - ANSWERASC 842 is the Accounting Standards Codification
(ASC) topic issued by the Financial Accounting Standards Board (FASB) that
governs the accounting for leases.
What are the key changes brought by ASC 842? - ANSWERASC 842
significantly changed lease accounting by requiring lessees to recognize most
leases on their balance sheets as both a right-of-use asset and a lease liability.
What are the criteria for a lease to be classified as a finance lease under ASC
842? - ANSWERThe criteria include title transfer, bargain purchase option,
lease term equal to or greater than 75% of the economic life, present value of
payments equal to or greater than 90% of fair market value, and specialized
nature of the asset.
Double-Dip Lease - ANSWERBased on cross-border leases, but structured to
take advantage of tax benefits in both the lessee and lessor's country
Leveraged Lease - ANSWER· Unique mix of tax an accounting benefits.
· Up to 97% of recourse and nonrecourse debt is used to finance the assets.
· Created high returns on equity to the lessor which allowed the lessor to
offer lower rates.
, Synthetic Lease - ANSWERDesigned to be a loan for tax purposes, but an
operating lease for accounting purposes.
Equipment Lease Definition - ANSWERA transaction in which use and
possession, but not title to tangible property, is transferred for consideration.
Micro-Ticket - ANSWER· Less than $25,000
· Examples: credit card, machines, laptops, computers, etc.
Small-Ticket - ANSWER· Less than $250,000
· Examples: trucks, trailers, medical equipment, etc.
Mid-Ticket - ANSWER· Less than $5,000,000
· Examples: fleet vehicles, CNC machine tools, agricultural equipment, etc.
Large Ticket - ANSWER· Larger than $5,000,000
· Examples: Rail cars, aircraft, marine, etc.
Industry Participants - ANSWER· Equipment End-Users - Borrower/Lessee
· Third Party Originators - Brokers, Alternative Lenders, etc.
· Lessors & Lenders - Suppliers of the finance produce
· Investors - Capital market buyers and sellers
· Regulators - IRS, CFPB, etc.
· Trade Associations - AACFB, CLFP, ELFA, NEFA, etc.
