Sec. 32.2681  Capital leases.

    (a) This account shall include all property acquired under a capital 
lease. A lease qualifies as a capital lease when one or more of the 
following criteria is met:
    (1) By the end of the lease term, ownership of the leased property 
is transferred to the leasee.
    (2) The lease contains a bargain purchase option.
    (3) The lease term is substantially (75% or more) equal to the 
estimated useful life of the leased property. However, if the beginning 
of the lease term falls within the last 25% of the total estimated 
economic life of the leased property, including earlier years of use, 
this criterion shall not be used for purposes of classifying the lease.
    (4) At the inception of the lease, the present value of the minimum 
lease payments, excluding that portion of the payments representing 
executory costs to be paid by the lessor, including any profit thereon, 
equals or exceeds 90% or more of the fair value of the leased property. 
However, if the beginning of the lease term falls within the last 25% of 
the total estimated economic life of the leased property, including 
earlier years of use, this criterion shall not be used for purposes of 
classifying the lease.
    (b) All other leases are operating leases.
    (c) The amounts recorded in this account at the inception of a 
capital lease shall be equal to the original cost, if known, or to the 
present value not to exceed fair value, at the beginning of the lease 
term, of minimum lease payments during the lease term, excluding that 
portion of the payments representing executory costs to be paid by the 
lessor, together with any profit thereon.