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CLFP EXAM - Financial and Tax Accounting for Leases (Questions With Complete Solutions) Graded A+
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CLFP EXAM - Financial and Tax Accounting for Leases (Questions With Complete Solutions) Graded A+
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Name: Score:68 Multiple choice questions
Definition 1 of 68
A non-tax lease or conditional sales contract in the guise of a lease, in which the title is intended
to pass to the lessee at the end of the lease term.
Finance Lease
Leveraged Lease
Non-tax Lease
Money-Over-Money Lease
Definition 2 of 68
· Exception to the UCC rule of first-to-file wins
· PMSI is a security interest or claim on property that enables a lender who provides financing to
obtain priority ranking ahead of other secured creditors
· PMSI has priority over earlier filed ("perfected") security interest
· Must file in the state where the lessee is incorporated
· Must file within 20 days of DELIVERY of equipment to lessee
· Lessor must enable lessee to acquire the equipment (lessor must pay vendor; any down payment
reimbursed to lessee is not protected by PMSI rule)
Personal property
Security agreement
Fair Market Value Lease (fmv)
Purchase Money Security Interest (PMSI)
,Definition 3 of 68
Does not involve financing but accelerates the cash flow of the business in exchange for a slight
discount on the face value of the invoice. It's an off-balance sheet method of financing.
Competition to Equipment Financing
Legal Definition of a Lease
Alternative Funding - Invoice Factoring
Government leasing
Term 4 of 68
Audited Statement - Unqualified Opinion
o Full audit has been performed
o Statements do not comply with GAAP
o Statements do NOT fairly represent the company's financial status
o Full audit has been performed
o Statements are according to GAAP
o Fairly represents the company's financial status
A transaction in which use and possession, but not title to tangible property, is transferred
for consideration.
Lessee agrees to buy and the lessor agrees to sell the equipment for a predetermined
amount upon the termination of the lease
,Definition 5 of 68
· Regulations for secured transactions; not true leases
· Sets up a system for recording personal property known as a UCC-1 Financing Statement
· Governs rights in goods (including equipment) used as collateral for loans
· True leases do NOT need to have a UCC-1 filed, but it is a good idea in case the deal is held to
be a loan
· Does not cover all types of claims and equipment (aircraft, vessels, vehicles, and certain other
types of property are not covered)
· File I the state where the lessee is incorporated
· Key issue: first to file generally has a priority
· Name of the "debtor" must be perfectly correct
Uniform commercial code - 1-203
Uniform commercial code - article 2a warranties
Uniform Commercial Code - Article 9
Irs codes - at-risk
Definition 6 of 68
· Lowest level of assurance services
· Conducted in accordance with Statements on Standards for Accounting and Review Services
issued by the AICPA (American Institute of CPAs)
· Limited to presenting in the form of financial statements information that is the representation of
management
Reviewed Financial Statement
Statement Of Cash Flows
Government Leasing
Compiled Financial Statement
, Definition 7 of 68
Short-term, unsecured loans often used as a complement to a lease. Gives quick access to funds
to run or grow a business. Allows for flexibility in the ways the borrower may use the funds.
The Three Lenses for Examining Leases
Alternative Funding - Working Capital
Alternative Funding - Invoice Factoring
Equipment lease definition
Term 8 of 68
IRS Codes - At-Risk
Requires the party seeking benefits such as interest deduction and depreciation to actually
be "at-risk" for certain specified amounts
Personal property that can be leased as depreciable property
· 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.
· Service Companies - Software, Insurance, UCC filings, etc.
· Equipment Suppliers - Dealers, vendors, etc.
Resembles the structure of a finance lease, but provides for the lender to lend the
borrower an amount for the purchase of the equipment (typically, lender pays the vendor
invoice and files a lien against the collateral).
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