Capital Leases

A Capital Lease has the characteristics of a purchase agreement, and also meets certain criteria established by the Financial Accounting Standards Board Statement No. 13 (FASB 13). Such a lease is required to be shown as an asset and a related obligation on the balance sheet.

Two typical Capital Lease sub-forms are the Direct Financing Lease, which is the most similar to a bank loan, and the Sales-Type Leases, which, as implied, involve the sale of a product.