From a financial reporting perspective, an Operating Lease has the characteristics of a usage agreement and also meets certain criteria established by the Financial Accounting Standards Board (FASB). Such a lease is not required to be shown on a balance sheet of the lessee. The term is also used to refer to leases in which the lessor has taken a significant residual position in the lease pricing and, therefore, must salvage the equipment for a certain value at the end of the lease term in order to earn its rate of return. The criteria for meeting FASB 13 classification of an operating lease are: