Which statement best defines a lease?

Which statement best defines a lease?

• A. A contract to purchase an asset
• B. A contract that conveys the right to use an identified asset for a period of time in exchange for consideration
• C. A pure service arrangement
• D. A loan secured by asset

Answer: (B)

A lease is an agreement that grants the right to use an identified asset for a period of time in exchange for payments. The key element is control of the use of the asset for that period, not ownership. This makes the statement that describes conveying the right to use an identified asset for a period of time in exchange for consideration the best fit. A contract to purchase an asset isn't a lease because it involves transfer of ownership or an option to acquire it. A pure service arrangement lacks the right to use a specific asset. A loan secured by an asset is financing, not an arrangement to use the asset.

A lease is an agreement that grants the right to use an identified asset for a period of time in exchange for payments. The key element is control of the use of the asset for that period, not ownership. This makes the statement that describes conveying the right to use an identified asset for a period of time in exchange for consideration the best fit. A contract to purchase an asset isn't a lease because it involves transfer of ownership or an option to acquire it. A pure service arrangement lacks the right to use a specific asset. A loan secured by an asset is financing, not an arrangement to use the asset.