A lease that meets one or more of the following criteria, meaning it is classified as a purchase by the lessee: the lease term is greater than 75% of the property's estimated economic life; the lease contains an option to purchase the property for less than fair market value; ownership of the property is transferred to the lessee at the end of the lease term; or the present value of the lease payments exceeds 90% of the fair market value of the property.
A capital lease would be
considered a purchased asset for accounting purposes. A lease considered to have the economic
characteristics of asset ownership. A lease falls into capital lease category if any of
the following requirements are met:
I . The life of the lease is 75% or greater of the
assets useful life.
2. The lease contains a purchase agreement for less than
market value. 3. The lessee gains ownership at the end of the lease period.
4. The present value
of lease payments is greater than 90% of the asset's market value.