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Criteria for evaluating whether a lease can be capitalized

December 22, 2015

If one of the following is true then the lease can be capitalized:

S  The lease period is at least 75% of the asset’s life.

N The PV of lease payment is 90% or more of fair value of asset.

O Ownership is transferred at the end of lease period.

B Bargain purchase option exists.

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