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In this section

  • Abandoned Property
  • Accounts Payable
    • AP Payment Schedule
    • Direct Deposit for Reimbursements
    • Check and Electronic Payments
    • Foreign Currency Payments
    • Help for Payees
    • Help for BSCs
  • Accounts Receivable
    • Interdepartmental Billings
      • Authorized Direct Charge Processors
    • Registering Cornell in an External Entity’s Payment System
    • Writing Off Uncollectable Receivables
  • Deposits
  • External Organizations
  • Gift Funds
    • Indirect Cost on Gifts
    • Receiving Gifts
    • Gift Restrictions
    • Managing Restricted Gift Accounts
  • Interdepartmental Activity
  • Inventory Accounting Guidelines
  • Lease Classification
    • Does the contract contain a lease?
    • Is this an operating or a finance lease?
  • Petty Cash and Cash Drawers
  • Plant Construction Funds
  • Reconciliation Guidelines
    • Reconciling Asset and Liability Object Codes
    • Monitoring Operating Activity
    • Object Code Reviews
    • Correcting Unknown Variances
  • Reserve Accounts
  • Revenue Classification
    • Tuition and Student Fees
    • Government Appropriations
    • Grant and Contract
    • Gifts and Contributions
    • Medical Services
    • Investment Earnings
    • Auxiliary Enterprises
    • Educational Activities
    • Other Sales and Services
    • Interdepartmental Revenues
    • External Organization Income
    • Accounts Receivable
    • Allowance for Doubtful Accounts and Bad Debt Expenses
    • Accruals/Deferred Revenue
    • Revenue vs. Expense Reimbursement
    • Revenue Matrix
  • Transferring Funds
  • Travel Advances and Prepaid Expenses
  • WCM Accounts
    • Processing Entries to WCM

See also

  • Sponsored Financial Services
  • Capital Assets
  • Cost Analysis

Is this an operating or a finance lease?

After you've completed the Does the contract contain a lease? decision wizard, walk through these questions to determine whether your lease is an operating or a finance lease. Start by answering the first question below, and you will be guided to the result.

Print your result! Once you have your result, print this page (or print it to PDF) and include it with your form submission to Accounting.
Transfer of ownership: The lease transfers ownership of the property to Cornell by the end of the lease term. This criterion is met in situations where the lease agreement provides for the transfer of title at or shortly after the end of the lease term in exchange for the payment of a nominal fee, for example, the minimum required by statutory regulation to transfer title.
Lease purchase option: The lease grants Cornell the option to purchase the underlying asset and it’s reasonably certain that Cornell will opt to do so. “Reasonably certain” is a high threshold of probability where Cornell has a compelling economic reason to exercise the option.
Lease term: The lease term is equal to 75% or more of the estimated economic life of the leased property. However, if the beginning of the lease term falls within the last 25% of the total estimated economic life of the leased property, including earlier years of use, this criterion will not be used for purposes of classifying the lease. The “estimated economic life” is defined as the estimated remaining period during which the property is expected to be economically usable by one or more users, with normal repairs and maintenance, for the purpose for which it was intended at lease inception, without limitation by the lease term. Cornell typically equates the estimated economic life to the useful life used for depreciation.
Present value: The present value of the sum of the minimum lease payments and any residual value guaranteed by Cornell that is not already reflected in the lease payments, equals or exceeds substantially all of the fair value of the underlying asset. Cornell defines “substantially all of the fair value of the underlying asset” as 90% or more. The fair value of the underlying asset is reduced by any related investment tax credit retained and expected to be realized by the lessor. You can calculate the present value of the lease payments using the rate implicit in the lease, or an approximation of the university’s incremental borrowing rate, which you can obtain by contacting Accounting.
Alternative use: The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. In assessing, the effect of contractual restrictions and practical limitations on the lessor’s ability to readily direct the underlying asset for another use should be considered. Any contractual restrictions should be substantive (i.e., enforceable) for the asset not to have an alternative use to the lessor. “Practical limitations” exist if the lessor would incur significant economic losses to direct the underlying asset for another use. Examples of practical limitations are assets that have unique design specifications or that are in remote areas.

This lease classifies as a finance lease. Choose the correct object code and complete the Lease Determination Form and submit it to Accounting.

This lease classifies as a finance lease. Choose the correct object code and complete the Lease Determination Form and submit it to Accounting.

This lease classifies as a finance lease. Choose the correct object code and complete the Lease Determination Form and submit it to Accounting.

This lease classifies as a finance lease. Choose the correct object code and complete the Lease Determination Form and submit it to Accounting.

This lease classifies as a finance lease. Choose the correct object code and complete the Lease Determination Form and submit it to Accounting.

This lease classifies as an operating lease. Choose the correct object code and complete the Lease Determination Form and submit it to Accounting.

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