Aa Aa E 3. Effects of leasing on financial statements Leasing is often referred to as off-balance-sheet financing because of the way that the transaction is treated and reported in financial statements. Which of the following statements best describes the characteristics of off-balance-sheet financing? O Both the leased assets and the leased liabilities under the lease contract appear directly on the firm's balance sheet. O Only the leased asset but not the leased liabilities under the lease contract appears directly on the firm's balance sheet. O Neither the leased assets nor the leased liabilities under the lease contract appear directly on the firm's balance sheet. O Only the leased liabilities but not the leased assets under the lease contract appear directly on the firm's balance sheet. Consider the following statement on capital leases: Suppose a firm issues new debt to finance a new fixed asset and enters into a lease agreement instead of buying the asset. The firm's financial leverage increases. Such a financial lease should be treated as a loan and capitalized. Is the preceding statement true or false? O False O True