If the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term, then it must be considered to be an operating lease.

Question

Quizplus · Accepted Answer

The nature of the underlying asset having no alternative use to the lessor at the end of the lease term is a factor considered in lease classification, but it does not automatically result in an operating lease classification. This characteristic may lead to a finance lease if other criteria are met, as it indicates the lessor is likely to recover the investment through the lease payments.

If the Underlying Asset Is of Such a Specialized Nature