capital lease
USA
Functionally a financing transaction (an asset is acquired and a liability is incurred). A lease is a capital lease under GAAP if the characteristics of ownership passes from the lessor to the lessee or the lessee is compelled to purchase the asset that is being leased. Characteristics include:
• Term of the lease is greater than 75% of the property's estimated economic life.
• The lease includes an option to purchase the asset for less than fair market value.
• Ownership of the property is transferred to the lessee at the end of the lease term.
• The present value of the lease payments exceeds 90% of the fair market value of the property.

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

Look at other dictionaries:

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