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ASC 840-10-25-1 sets forth four criteria (detailed at ARM 4650.123), any one of which identifies a lease as a capital lease to the lessee. For the lessee in a real estate sale-leaseback transaction, unless the transaction qualifies for recognition of the sale (ARM 4650.52), the classification criteria of ASC 840-10-25-1 are irrelevant. For companies that are lessees in transactions with potential Variable Interest Entities or special purpose entities, there are additional considerations (ARM 4650.14).
A lease that meets one of the criteria of ASC 840-10-25-1 and both criteria of ASC 840-10-25-42 is a direct financing, a leveraged or a sales-type lease to the lessor. A direct financing lease is one where the asset’s carrying value equals its fair value at the inception of the lease. A sales-type lease is one that gives rise to a manufacturer's or dealer's profit (or loss) to the lessor in addition to having all the other attributes of a direct financing lease; normally, a sales-type lease will arise when a manufacturer or dealer of equipment uses leasing as a means of marketing products. A leveraged lease is more fully discussed at ARM 4650.54.
Leases that are not classified as either capital leases (by lessees) or direct financing, leveraged, or sales-type leases (by lessors) are classified as operating leases. The different lease accounting methods have significantly different financial statement impacts.

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