Chapter 3: Acquisition and Receiving

Capital Leases

Leases are recorded as capital equipment when the lease agreement is greater than $50,000 and one or more of the following criteria are met:

  1. The lease transfers ownership of the property to Michigan Tech by the end of the lease term.
  2. The lease contains a purchase option.
  3. The lease term is equal to 75% or more of the estimated economic life of the leased property.
  4. The present value of the minimum lease payments equals or exceeds 90% of the fair market value of the leased property.

If the lease does not meet any of the above criteria, the university recognizes the expense as the lease payments are made.

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