When a lease meets one of the Type I criteria and both of the Type II criteria,the lessor must treat the lease as a capital lease.

Question

Quizplus · Accepted Answer

This statement is correct. When a lease meets one of the Type I criteria (transfer of ownership, bargain purchase option, lease term 75% or more of asset's economic life) and both of the Type II criteria (minimum lease payments 90% or more of asset's fair value, and substance of the lease indicating lessee's control), the lessor must treat the lease as a capital lease.

When a Lease Meets One of the Type I Criteria