Accounting Dictionary

Operating Lease

An operating lease occurs when a company rents something for an extended period of time.

Some criteria a lease must meet in order to be considered an operating lease include: 1) Is the lease term less than 75% of the estimated useful life of the asset? 2) Is the present value of the lease payments less than 90% of the original cost of the asset? 3) Does the asset go back to the original owner at the end of the term?

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