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Characteristic Of Finance Lease

Published by slang July 7th, 2008 in Lease Accounting

Tabulate below are the characteristic that indicates it as a Finance lease:-



  1. Transfer of ownership at the end of the lease term to a lessee [IAS17.10(a)(R.05)].
  2. The lessee has a bargain purchase option [IAS17.10(b)(R.05)].
  3. The lease term covers the major part of the asset’s economic life [IAS17.10(c)(R.05)].
  4. Payments made by a lessee that are a substantial portion of a leased asset’s fair value might be presumed to give rise to a finance lease
  5. The leased asset is constructed to the lessee’s specification and could not be used by others without significant modification [IAS17.10(e)(R.05)]

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