Finance Lease Criteria

Under U.S. GAAP, one of five criteria must be satisfied for a lease to be a finance lease: � Ownership transfers at the end of the lease. � There is a written purchase option. � The net present value of the minimum lease payments is greater than or equal to 90 percent of the fair value of the leased asset. � Economic life (major part) of the underlying asset within lease term. � Specialized asset such that it will not have an alternative use to lessor. See also finance lease (U.S. GAAP) and operating lease.