1. The lease transfers ownership of the property to the tenant by the end of the lease term.

2. The lease contains an option to purchase the leased property at a bargain price.

3. The lease term is equal to or greater than 75 percent of the estimated economic life of the leased property.

4. The present value of rental and other minimum lease payments equals or exceeds 90 percent of the fair value of the leased property.

Even if their leases fail these tests, companies may eventually have no choice but to include them on their balance sheets if the Financial Accounting Standards Board accepts the reasoning of the International Accounting Standards Board. Since the IASB makes no distinction between operating and capital leases, such financing must be included on balance sheets by companies reporting under International Accounting Standards. And while any such treatment under U.S. GAAP would be a long way off, FASB has said that it would take the IASB's position on leasing into account as it helps resolve differences between the two accounting regimes.

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