he criteria for a capital lease can be any one of the following four alternatives:
Ownership. The ownership of the asset is shifted from the lessor to the lessee by the end of the lease period; or
Bargain purchase option. The lessee can buy the asset from the lessor at the end of the lease term for a below-market price; or
Lease term. The period of the lease encompasses at least 75% of the useful life of the asset (and the lease is noncancellable during that time); or
Present value. The present value of the minimum lease payments required under the lease is at least 90% of the fair value of the asset at the inception of the lease.
If a changes in lease agreement contains any one of the preceding four criteria, the lessee records it as a capital lease