Financial Lease Identification

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Last updated 4:21 PM on 5/13/26
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6 Terms

1
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Transfer of Ownership Test

Ownership transfers to lessee at the end of the lease.

2
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Purchase Option Test

Lessee has option to purchase asset and is expected to do so (Bargain purchase option)

3
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Lease Term Test

Lease term is for 75% of economic life of asset or longer.

4
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Present Value Test

(PV of lease payments +PV of Residual Value Guarantee) > Fair Value of Asset. Discount rate used is implicit rate of lessor or own rate if the former is unknown.

5
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Alternate Use Test

Asset has no alternative use to lessor at lease end.

6
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Capitalization of Leased Assets

Dr. Right-of-Use Asset
Cr. Lease Liability