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Operating

 

If none of the criteria is met in a capital lease, the lease should then be accounted for as an operating lease.


Normally, rental payments should be charged to expense over the term of the operating lease as they become payable.The term for an operating lease is shorter than the expected useful life of the equipment. This makes this type of lease favorable when leasing high-tech equipment. Shorter term leases help users stay ahead of equipment obsolescence within their high tech industry.