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Capital and Operating Lease

How do I determine if a lease is capital or operating?

The University automatically classifies leases as operating where the cost of documentation, accounting and disclosure, and audit support, significantly exceeds the benefit to University stakeholders. To be considered a capital lease at the University, the total value of future minimum lease payments or fair value (whichever is less) must be significant to the University and require recognition as a long-term debt in the University's annual audited financial report (as determined by Financial Reporting) and must meet one or more of the following criteria:

  • Lease term is greater than 75% of the equipment's estimated economic life;
  • Lease contains an option to purchase the equipment for less than fair market value;
  • Ownership of the equipment is transferred to the university at the end of the lease term; or
  • Present value of the lease payments exceeds 90% of the fair market value of the equipment.
Who should I contact if I have questions about setting up a lease for equipment?

Please contact Equipment Inventory at 206-543-4663 with general questions related to leases or Financial Reporting at 206-221-7845 to determine if the lease should be classified as capital or operating.

Can I surplus leased equipment?

No, leased equipment is technically not University property - we are only tracking it for the company we are leasing it from.