Final answer:
The statement is true. Leases where the present value of the payments exceeds 80% of the asset's fair value are capitalized, reflecting the leasing as a purchase in the financial statements.
Step-by-step explanation:
True. According to the accounting standard ASC 840, a lease where the present value of the minimum lease payments exceeds 80% of the fair value of the asset is considered a capital lease and must be capitalized.
In a capital lease, the lessee records both an asset and a liability on their balance sheet. The asset represents the right to use the leased asset, and the liability represents the obligation to make future lease payments.
For example, if the fair value of an asset is $10,000 and the present value of the minimum lease payments is $8,500 or more, it would have to be capitalized as a capital lease.