If the present value of lease payments equals or exceeds 90% of the fair value of the leased property the

A) conditions are met for the lease to be considered a capital lease.
B) lease is uneconomical and should not be entered into.
C) lease may be classified as an operating lease.
D) recording of a lease liability is optional-that is the off-balance sheet approach can be elected.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, used in discounting and investment appraisal.

Fair Value

Fair value refers to the estimated market value of an asset or liability, based on current market conditions and comparable transactions, used in financial reporting.

Capital Lease

A lease considered to have the economic characteristics of asset ownership for accounting purposes.