Friday, July 10, 2009

the accounting criteria for capitalizing leases by the lessee

To record a lease as capital lease one or more of four criteria must be met:
1- transfers ownership to the lessee.
2- contains a bargain purchase option.
3- lease term is equal to or greater than 75 percent of the estimated economic life of the leased property.
4- the present value of the minimum lease payments, equals or exceeds 90 percent of the fair value of the leased property.

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