To be classified as a finance lease, at least one of the following criteria must be true:
A transferral of ownership of an asset to the lessee at the end of the term of the initial lease.
The lessee is reasonably certain that they will exercise a purchase option at the end of the term of the lease.
The leased asset has no alternative use to the lessor at the end of the lease.
The lease term is a major part of the economic life of the underlying asset (75% was the previous common bright line test number, and most organizations continue to use this to determine “major part”).
The present value of lease payments is substantially all of the fair value of the leased asset (90% was the previous bright line test number, and most organizations continue to use this to determine “substantially all”).