Which of the following is a required disclosure for direct finance leases?

• A. Unguaranteed residual value.
• B. The cost of the property being leased.
• C. Minimum lease payments for each of the next five years.
• D. Total contingent rentals.

Answer: (A)

Focusing on what the lessor must disclose for a direct finance lease, the unguaranteed residual value of the leased asset is required. This amount is part of the net investment in the lease and reflects the portion of the asset’s value at the end of the lease that isn’t guaranteed by the lessee or others. It directly affects how much cash the lessor expects to recover beyond the minimum lease payments and signals the residual risk the lessor bears. The other items aren’t mandated disclosures on their own for direct finance leases: the cost of the property has already been captured in the asset’s initial recognition, per-leased-year minimum payments aren’t required as a separate line item, and total contingent rentals don’t represent a standalone mandatory disclosure in this context.