Lease Accounting Glossary
Quickly find precise definitions to lease accounting terms
Defining Lease Accounting Topics and Terms
A lessee should record a lease as a capital lease and therefore apply capital lease accounting if ANY of the following criteria are met:
- First Criterion: Ownership of the underlying asset transfers to the lessee after the lease term; or
- Second Criterion: There is a “bargain purchase option”, meaning that the lessee has an option to buy the underlying asset after the lease term at a price that’s below-market; or
- Third Criterion: The lease term is 75% or greater than the useful life of the underlying asset; or
- Fourth Criterion: The present value of the minimum lease payments is at least 90% of the fair value of the asset.