Defining long funding leases: the three tests: CAA01/S70J
A funding lease is a plant or machinery lease that satisfies at least one of these conditions at its inception:
- it is or will be accounted for as a finance lease or loan: this is the finance lease test (CAA01/S70N) described at BLM20210 onwards
- the present value of the minimum lease payments is equal to or more than 80 per cent of the fair value of the asset: this is the lease payments test (CAA01/S70O) described at BLM20225
- the term of the lease is more than 65 per cent of the remaining useful economic life of the asset: this is the useful economic life test (CAA01/S70P) described at BLM20255.
Exclusions from these general rules are explained at BLM20405.