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.