Expand
Resize
Add to favorites
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.
Expand

Welcome to Viewpoint, the new platform that replaces Inform. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory.

signin option menu option suggested option contentmouse option displaycontent option contentpage option relatedlink option prevandafter option trending option searchicon option search option feedback option end slide