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explain all five classification tests for leasing to your partner. In your opinion which is the...

explain all five classification tests for leasing to your partner. In your opinion which is the easiest test to qualify as a Finance lease, and why?
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Answer #1

Following are the five test to classified as a finance lease :

1. The lease transfers ownership of the asset to the lessee by the end of the lease term.

2. The lease term cover the major lart of economic life of asset.

3. The present value of minimum lease payment substantially cover the fair value of leas asset.

4. The lease asset are of a specialised nature such that only the lessee can use them without major modifications being made

5. If the lessee is entitled to cancel the lease, the lessor's losses associated with the cancellation are borne by the lessee

The easiest test to qualify as finance lease as per my opinion is test no.2 &3 as above i.e 1.The lease term cover the major lart of economic life of asset 2. The present value of minimum lease payment substantially cover the fair value of lease asset.

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